Judge Daniel M. Crowley, Case 21SMCV01621 2023-03-20 Tentative Ruling

Judge: Daniel M. Crowley, Case: 21SMCV01621, Date: 2023-03-20 Tentative Ruling

Case Number: 21SMCV01621 Hearing Date: March 20, 2023 Dept: 207

Background

This case concerns the purchase and sale of real property located at 9221 Charlieville Blvd., Beverly Hills, California 90210. On October 10, 2021, Plaintiff, purchaser JJK Enterprises LLC filed a Complaint seeking specific performance of its purchase agreement with seller, defendant Charlieville View, LLC’s. On December 6, 2021, Charlieville View (“Cross-Complainant”) filed a Cross-Complaint against Plaintiff, and Cross-Defendants David Shaaya and Continental Real Estate Services, Inc. (collectively “Cross-Defendants”) seeking, among other things, to invalidate the purchase agreement.

On November 29, 2022, Cross-Complainant filed a First Amended Cross-Complaint (“FACC”) asserting causes of action for breach of fiduciary duty, fraud, negligence, negligent misrepresentation, and constructive fraud. Cross-Defendants bring this demurrer as to each of these causes of action except the claim for breach of fiduciary duty, arguing each fails to state sufficient facts to constitute a cause of action against them pursuant to Code Civ. Proc. § 430.10(e). Cross-Complainant opposes the demurrer.

Legal Standard

When considering demurrers, courts read the allegations liberally and in context. (Wilson v. Transit Authority of City of Sacramento (1962) 199 Cal.App.2d 716, 720-21.) In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) “A demurrer tests the pleading alone, and not on the evidence or facts alleged.” (E-Fab, Inc. v. Accountants, Inc. Servs. (2007) 153 Cal.App.4th 1308, 1315.) As such, the court assumes the truth of the complaint’s properly pleaded or implied factual allegations. (Id.) However, it does not accept as true deductions, contentions, or conclusions of law or fact. (Stonehouse Homes LLC v. City of Sierra Madre (2008) 167 Cal.App.4th 531, 538.)

The general rule is that the plaintiff need only allege ultimate facts, not evidentiary facts. (Doe v. City of Los Angeles (2007) 42 Cal.4th 531, 550.) “All that is required of a plaintiff, as a matter of pleading, even as against a special demurrer, is that his complaint set forth the essential facts of the case with reasonable precision and with sufficient particularity to acquaint the defendant with the nature, source and extent of his cause of action.” (Rannard v. Lockheed Aircraft Corp. (1945) 26 Cal.2d 149, 156-157.)

Analysis

1. Meet and Confer Requirement

The Court finds Cross-Defendants have complied with the meet and confer requirements set forth under Code of Civil Procedure § 430.41. (Campain Decl. at ¶¶2-4.)

2. Duplicative Causes of Action

Cross-Defendants argue Cross-Complainant’s causes of action for fraud, negligence, negligent misrepresentation, and constructive fraud are duplicative of the first cause of action for breach of fiduciary duty. Cross-Defendants argue these causes of action all arise from the same operative facts as the cause of action for breach of fiduciary duty and thus add nothing to the FACC. Cross-Defendants’ argument relies primarily on the holdings reached in Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371 and Palm Springs Villas II Homeowners Assn., Inc. v. Parth (2016) 248 Cal.App.4th 268.

The Court in Careau held a cause of action for breach of the implied covenant of good faith and fair dealing was duplicative of a cause of action for breach of contract where the two causes of action were based on the same alleged contractual breach. The Court held “A breach of the implied covenant of good faith and fair dealing involves something beyond breach of the contractual duty itself and it has been held that bad faith implies unfair dealing rather than mistaken judgment.” (Careau, supra, 222 Cal.App.3d at 1394.) “If the allegations do not go beyond the statement of a mere contract breach and, relying on the same alleged acts, simply seek the same damages or other relief already claimed in a companion contract cause of action, they may be disregarded as superfluous as no additional claim is actually stated … [T]he only justification for asserting a separate cause of action for breach of the implied covenant is to obtain a tort recovery.” (Id. at 1394-1395.) The holding in Careau was thus based on the specific relationship between the causes of action for breach of contract and breach of the implied covenant of good faith and fair dealing.

Cross-Defendants’ reliance on Palm Springs Villas is similarly misplaced. In Palm Springs Villas the Court of Appeal affirmed the sustaining of a demurrer based on the appellant’s failure to address the argument that its causes of action for breach of an association’s governing documents to be duplicative of its cause of action for breach of fiduciary duty:

Regardless, as Parth argues, the cause of action for breach of governing documents appears to be duplicative of the cause of action for breach of fiduciary duty.… The Association does not address Parth's argument or explain how its document claim differs from the fiduciary breach claim. We conclude that the trial court properly sustained the demurrer.

Palm Springs Villas, 248 Cal.App.4th at 290. Nothing in Careau or Palm Springs Villas suggests that a cause of action is necessarily duplicative whenever it arises from the same operative facts as another cause of action.

“[M]odern rules of pleading generally permit plaintiffs to ‘set forth alternative theories in varied and inconsistent counts.’” (Klein v. Chevron U.S.A., Inc. (2012) 202 Cal.App.4th 1342, 1388 [quoting Rader Co. v. Stone (1986) 178 Cal.App.3d 10, 29]; Mendoza v. Continental Sales Co., Inc. (2006) 140 Cal.App.4th 1395, 1402 [“When a pleader is in doubt about what actually occurred or what can be established by the evidence, the modern practice allows that party to plead in the alternative and make inconsistent allegations”].)

Some Courts have sustained a demurrer on the ground that a cause of action merely duplicates another cause of action and adds nothing to the complaint by way of fact or theory. (See, e.g., Award Metals v. Superior Court (1991) 228 Cal.App.3d 1128, 1135.) However, other Courts have rejected this notion in whole or in part. For example, in Charnay v. Cobert (2006) 145 Cal.App.4th 170, the trial court sustained a demurrer to plaintiff’s cause of action for breach of contract, finding it was duplicative of plaintiff’s other causes of action. The Court of Appeal reversed, acknowledging that while the “breach of contract claim is premised on the same allegations comprising her legal malpractice, breach of fiduciary duty and fraud claims,” plaintiff had sufficiently alleged the actions which formed the basis of those claims also constituted a breach of the retainer agreement such as to entitle plaintiff to assert a cause of action for breach of contract. (Id. at 186.)

The Court in Blickman Turkus, LP v. MF Downtown Sunnyvale, LLC (2008) 162 Cal.App.4th 858 went further and held the objection that a cause of action is duplicative of another in the complaint “is not a ground on which a demurrer may be sustained.” (Id. at 890.) Instead, the Court noted “This is the sort of defect that, if it justifies any judicial intervention at all, is ordinarily dealt with most economically at trial, or on a dispositive motion such as summary judgment.” (Id.)

The Court finds the challenged causes of action are not merely duplicative of the first cause of action for breach of fiduciary duty. As Cross-Complainant points out, a cause of action for breach of fiduciary duty requires a different showing than a cause of action for fraud, which itself requires a different showing than a cause of action for negligence. Where parties are not sure what cause of action the ultimate evidence will support, they are permitted to plead alternate theories of liability premised on the same operative facts. The Court OVERRULES Cross-Defendants’ demurrer to Cross-Complainant’s causes of action for negligence, negligent misrepresentation, and constructive fraud.

2. Fraud

Cross-Defendants separately demurrer to Cross-Complainant’s second cause of action for fraud. “The elements of fraud,” including a cause of action for fraudulent inducement, “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.4th 153, 157.)

The Court finds Cross-Complainant’s claim for fraud has not been pled with the requisite level of specificity. The claim for fraud is based on allegations that Cross-Defendants (1) prepared draft purchase agreements which did not include language Cross-Complainant wanted concerning a 1031 exchange, (2) pressured Cross-Complainant to sign the purchase agreement without allowing sufficient time for Cross-Complainant to review the agreement, and (3) falsely represented they had Cross-Complainant’s best interests at heart. (FACC at ¶37.) The factual allegations supporting this cause of action (FACC at ¶¶1-23) are pled generally, not specifically. Statements are described generally without a clear indication of who made them or when. For example, the FACC attributes multiple statements and actions to both Cross-Defendants rendering it unclear whether both Cross-Defendants are alleged to have separately engaged in this conduct or whether Cross-Complainant is seeking to hold one Cross-Defendant liable for the statements or actions of the other.

Further, Cross-Defendant Continental is a corporate entity and thus Cross-Complainant is required to specifically allege the identity of the individuals speaking or acting on behalf of the corporation, there authority, as well as what they said, to whom, and when. The FACC contains no such specific factual allegations as to Continental.

The Court finds these factual deficiencies can be cured by further amendment of the Cross-Complaint, and thus the Court SUSTAINS Cross-Defendants’ demurrer to this cause of action with leave to amend.

Conclusion

Cross-Defendants’ demurrer to Cross-Complainant’s second cause of action for fraud is SUSTAINED with 30 days’ leave to amend and is otherwise OVERRULED.