Judge: Craig Griffin, Case: Johnson v. Dodd, Date: 2022-10-17 Tentative Ruling
Defendants HSCA, Inc. (“HSCA”) and Raymond J. Radas’ (“Radas”) (collectively “Moving Defendants”) Demurrer to Plaintiffs Ronald Johnson and Kim Johnson’s (“Plaintiffs”) Complaint is SUSTAINED in part without leave to amend, and OVERRULED in part, as set forth below.
Moving Defendants’ Motion to Strike is GRANTED in part without leave to amend and DENIED in part, as set forth below.
Demurrer
The demurrer to this cause of action is OVERRULED.
Plaintiffs allege that prior to the sale of the Property, Moving Defendants and Sellers made material misrepresentations to Plaintiffs and concealed material information from Plaintiffs regarding the condition of the Property in order to sell the Property to Plaintiffs and obtain a “windfall of improper profits.” (Compl. ¶¶ 31-33.) These misrepresentations are alleged to have been made to Plaintiffs in the disclosure forms dated November 9, 2021 and November 18, 2021. (Id. at ¶¶ 20-25; see Exhibits A, B and C to Notice of Errata Re Exhibits to Plaintiffs’ Complaint (ROA 8).) The misrepresentations made are alleged in detail in paragraphs 20, 22, 24, 26 and 27 of the Complaint.
Plaintiffs further allege that Moving Defendants and Sellers made these statements with the intent to deceive and defraud Plaintiffs into believing that the Property was free from the issues not disclosed. (Compl. ¶ 35.) Plaintiffs also allege that they reasonably relied upon the material misrepresentations; that, as a result, Plaintiffs proceeded with the purchase of the Property; and that they have sustained resulting damages. (Id. at ¶¶ 36-37.)
The Court finds the above allegations to be sufficient to plead a fraud cause of action as each element is alleged factually and specifically and the allegations plead facts showing how, when, where, to whom, and by what means the representations were tendered. (Wilhelm v. Pray, Price, Williams & Russell (1986) 186 Cal.App.3d 1324, 1332; Lazar v. Superior Court (1996) 12 Cal.4th 631, 645; Philipson & Simon v. Gulsvig (2007) 154 Cal.App.4th 347, 363 [elements of fraud].)
Further, the fraud cause of action pleads misrepresentations based on the Agent Visual Inspection Disclosure, which was executed by Moving Defendants and which Moving Defendants do not dispute contains various representations made by them to Plaintiffs concerning the Property. Thus, the fraud cause of action against Moving Defendants asserts a viable claim at least based on the alleged misrepresentations contained in the Agent Visual Inspection Disclosure. As such, Moving Defendants’ argument that the demurrer should be sustained because the Transfer Disclosure Statement and Seller Property Questionnaire do not contain representations of the agent fails. “Ordinarily, a general demurrer does not lie as to a portion of a cause of action and if any part of a cause of action is properly pleaded, the demurrer will be overruled.” (Elder v. Pacific Bell Telephone Co. (2012) 205 Cal.App.4th 841, 856 fn 14.)
Defendants also argue that the Complaint does not allege what defects Moving Defendants observed from their visual inspection that were omitted from the agent’s visual disclosure. However, the Complaint alleges that Moving Defendants had knowledge of the concealments and material misrepresentations regarding the issues related to the Property, “including those like the absence of vents in the bathrooms and the lack of electricity to the hood above the stove, that they each visualized on numerous occasions prior to the sale of the Property to Plaintiff.” (Compl. ¶ 34.) Thus, the Complaint can be reasonably interpreted to allege the above defects that Moving Defendants observed and that were omitted from disclosure. In reviewing the sufficiency of a complaint against a general demurrer, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. (Blank v. Kirwan (1985) 39 Cal. 3d 311, 318.)
The demurrer to this cause of action is OVERRULED.
Contrary to Moving Defendants’ argument, the Complaint adequately alleges the elements of the cause of action for negligent misrepresentation. The Complaint alleges that the representations made by Moving Defendants regarding the condition of the Property (discussed above in connection with the fraud claim) were made with a reckless disregard for the truth thereof, and without a reasonable basis for believing the representations to be true; that the misrepresentations were made in order to induce Plaintiffs into purchasing the Property; Plaintiffs justifiably relied on the misrepresentation by agreeing to purchase the Property; and Plaintiffs have been damaged thereby. (Compl. ¶¶ 39-43; see also, Borman v. Brown (2021) 59 Cal.App.5th 1048, 1060 [elements of negligent misrepresentation].) The Court finds the foregoing allegations to be sufficient.
The demurrer to this cause of action is OVERRULED.
Moving Defendants’ argument that this cause of action is duplicative of the first and second causes of action lacks merit. The first and second causes of action for fraud and negligent misrepresentation contain allegations of intent and reliance that are not included in the fourth cause of action. Further, a plaintiff may proceed on a cause of action for violation of a specific statute and a cause of action in tort based on the same conduct, which is what Plaintiffs have done here. (See De Anza Santa Cruz Mobile Estates Homeowners Assn. v. De Anza Santa Cruz Mobile Estates (2001) 114 Cal.App.4th 890, 915; see also, Palm Springs Villas II Homeowners Assn., Inc. v. Parth (2016) 248 Cal.App.4th 268, 290.) Thus, the demurrer on this ground is not well-taken.
Moving Defendants also appear to contend that the fourth cause of action fails because they have complied with the requirements of Section 1102, et seq., and 2079, et seq. by conducting a diligent visual inspection and providing the required disclosure. This argument misses the point. The Complaint pleads that Moving Defendants did not comply with the above civil code sections because they failed to disclose numerous known and/or observed defects in the Property. Any argument that Moving Defendants engaged in a diligent visual inspection is outside the scope of demurrer as a demurrer admits the truth of all material facts properly pleaded. (Aubry v. Tri-City Hosp. Dist. (1992) 2 Cal.4th 962, 966-967; Serrano v. Priest (1971) 5 Cal.3d 584, 591.)
Moving Defendants also argue that this COA fails because the Transfer Disclosure Statement and Seller Property Questionnaire are not representations of the agent. This argument fails for the same reasons as discussed in connection with the fraud claim, i.e., this cause of action also alleges misrepresentations made in the Agent Visual Inspection Disclosure, which without dispute contains representations of the agent. Because a general demurrer does not lie to a portion of a cause of action, the demurrer on this ground is not well-taken. (See Elder v. Pacific Bell Telephone Co. (2012) 205 Cal.App.4th 841, 856 fn 14.)
The demurrer to this cause of action is OVERRULED.
The Court finds that the Complaint sufficiently pleads a cause of action for negligence. The Complaint pleads that Moving Defendants’ owed Plaintiffs a duty under California Civil Code § 1102, et seq. and 2079.16, et seq. to disclose and accurately represent all material defects and deficiencies with regard to the Property; that Moving Defendants breached that duty; and that Plaintiffs were damaged thereby. (Compl. ¶¶ 74-76; see also, Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th 49, 62 [elements of negligence].)
Moving Defendants are correct that the doctrine of “negligence per se” is not a separate cause of action. (McKenna v. Beesley (2021) 67 Cal.App.5th 552, 574 fn 26; Evid. Code § 669.) However, because the cause of action pleads a valid negligence claim, the demurrer on this ground is not well-taken. Under Section 430.10(e) the test is whether the complaint states any valid claim entitling plaintiff to relief, even if plaintiff’s cause of action is improperly titled, or an improper remedy is stated. (Quelimane Co., Inc. v. Stewart Title Guar. Co. (1998) 19 Cal.4th 26, 38.)
Moving Defendants’ argument that this cause of action is duplicative of the fourth cause of action for violation of the civil code also fails. As noted above, a plaintiff may proceed on a cause of action for violation of a specific statute and a cause of action in tort based on the same conduct. (See De Anza Santa Cruz Mobile Estates Homeowners Assn. v. De Anza Santa Cruz Mobile Estates (2001) 114 Cal.App.4th 890, 915; see also, Gebert v. Yank (1985) 172 Cal.App.3d 544, 554 [“Pleading of alternative theories of relief on the same set of facts is, of course, quite proper...”].) Thus, the demurrer on this ground is not well-taken.
Plaintiffs do not oppose the demurrers to the third, fifth and sixth causes of action. Thus, the demurrers to said causes of action are SUSTAINED without leave to amend as to Moving Defendants.
Motion to Strike
Plaintiffs do not oppose the motion as to the fifth cause of action. Thus, the motion is GRANTED without leave to amend as to Item 3 in the notice of motion (Para. 67) and as to the phrase “and fifth” in Item 4 in the notice of motion. Said portions of the Complaint are ordered stricken with respect to Moving Defendants only.
As to the remainder of the motion, Moving Defendants argue that Plaintiffs have failed to set out specific allegations of fact to support a claim that Moving Defendants acted with malice, oppression or fraud such that Plaintiffs would be entitled to punitive damages. Moving Defendants also argue that Plaintiffs have not alleged authorization or ratification of purported oppression, fraud or malice on the part of HSCA.
As to HSCA, Moving Defendants are correct that the Complaint fails to allege that the conscious disregard, authorization, ratification or act of oppression, fraud, or malice was on the part of an officer, director, or managing agent of HSCA as required by Civil Code § 3294(b). The Complaint alleges only that Radas was an “employee and/or agent” of HSCA (see Compl. ¶ 13), which is insufficient. An individual must be in a corporate policymaking position in order to be considered a managing agent for the purposes of imposing punitive damages liability on the corporation. (Myers v. Trendwest Resorts, Inc. (2007) 148 Cal.App.4th 1403, 1437.) Thus, the Complaint fails to properly allege punitive damages as to HSCA.
Accordingly, the court GRANTS the motion as to HSCA without leave to amend, but without prejudice to future motion to amend should facts supporting punitive damages as to HSCA be uncovered in discovery.
As to Radas, based on the court’s ruling on the demurrer, Plaintiffs have alleged a viable fraud claim against Moving Defendants. Thus, Plaintiff may be entitled to recovery of punitive damages against Radas based on the allegations of fraud. (Civil Code § 3294(a).)
Accordingly, the motion to strike Plaintiffs’ allegations of and prayer for punitive damages is DENIED as to Radas.
Moving Defendants are to file an answer to the Complaint as modified within 15 days.
Moving Defendants to give notice.