Judge Daniel M. Crowley, Case Number: 22STCV240468, Date: 2023-08-15 Tentative Ruling

Cross-Defendant Marshall Pattison’s unopposed demurrer to Cross-Complainants Steven Schaffer’s, Susan Goldstein’s, Robert Schaffer’s, and SSR Apartments’ cross-complaint is sustained as to the 3rd, 4th, 5th, and 7th causes of action.

Cross-Defendant Marshall Pattison’s motion to strike to Cross-Complainants Steven Schaffer’s, Susan Goldstein’s, Robert Schaffer’s, and SSR Apartments’ cross-complaint is denied as moot.

Cross-Defendant Marshall Pattison (“Pattison”) (“Cross-Defendant”) demurs to the 3rd, 4th, 5th, and 7th cause of action in Cross-Complainants Steven Schaffer’s (“Steven”), Susan Goldstein’s (“Goldstein”), Robert Schaffer’s (“Robert”), and SSR Apartments’ (“SSR”) (collectively, “Cross-Complainants”) cross-complaint (“CC”). (Notice of Demurrer, pg. 1; C.C.P. §430.10.)

Cross-Defendant also moves to strike portions of the CC. (Notice of MTS, pgs. 2-5.)

Before filing a demurrer or motion to strike, the moving party must meet and confer in person or by telephone with the party who filed the pleading to attempt to reach an agreement that would resolve the objections to the pleading and obviate the need for filing the demurrer and/or motion to strike. (C.C.P. §430.41, §435.5.)

Cross-Defendant’s counsel declares he attempted to meet and confer Cross-Complainants’ counsel on December 26, 2022, and left a voicemail indicating his intent to meet and confer and requesting a return call. (Decl. of Alden.) Cross-Defendant’s counsel declares on Wednesday, December 28, 2022, he sent Cross-Complainants’ counsel something unidentified in his declaration, and again requested a return call. (Decl. of Alden.) Cross-Defendant’s counsel declares Cross-Complainants’ counsel refused again, via email, to meet and confer. (Decl. of Alden.) Parties failed to meet and confer; however, Cross-Defendant demonstrated a good faith effort to resolve the issues in the instant motions out of court. A determination by the court that the meet and confer process was insufficient shall not be grounds to overrule or sustain a demurrer or motion to strike. (C.C.P. §§430.41(a)(4), 435.5(a)(4).) Therefore, the Court will consider the instant demurrer and motion to strike.

Cross-Complainants filed the operative CC on November 30, 2022, against Cross-Defendant alleging seven causes of action: (1) negligence; (2) breach of contract; (3) breach of fiduciary duty; (4) fraud; (5) intentional interference with economic advantage; (6) negligent interference with prospective economic advantage; and (7) intentional interference with contractual relations. Cross-Complainants’ causes of action arise from Cross-Defendant’s relationship with Herb Schaffer (“Herb”), prior to Herb’s death in August 2019, in which Cross-Defendant performed accounting, bookkeeping, and other services for Herb and several of Herb’s entities (including SSR) beginning in or around 2000 and until Cross-Complainants terminated Cross-Defendant in early 2021. (See CC.)

Cross-Defendant filed the instant demurrer and motion to strike on January 27, 2023. Cross-Complainants filed a proposed first amended cross-complaint (“Proposed FACC”) on June 14, 2023. As of the date of this hearing, Cross-Complainants have not filed an opposition. Cross-Complainants have moved for leave to amend their CC.

Cross-Defendant demurs on the basis that Cross-Complainants’ 3rd, 4th, 5th, and 7th causes of action fail to state facts sufficient to constitute causes of action against Cross-Defendant and are so uncertain they fail to constitute to properly pleaded causes of action. (Demurrer, pg. 2; C.C.P. §§430.10(e), (f).)

“[A] demurrer tests the legal sufficiency of the allegations in a complaint.” (Lewis v. Safeway, Inc. (2015) 235 Cal.App.4th 385, 388.) A demurrer can be used only to challenge defects that appear on the face of the pleading under attack or from matters outside the pleading that are judicially noticeable. (See Donabedian v. Mercury Insurance Co. (2004) 116 Cal.App.4th 968, 994 [in ruling on a demurrer, a court may not consider declarations, matters not subject to judicial notice, or documents not accepted for the truth of their contents].) For purposes of ruling on a demurrer, all facts pleaded in a complaint are assumed to be true, but the reviewing court does not assume the truth of conclusions of law. (Aubry v. Tri-City Hospital District (1992) 2 Cal.4th 962, 967.)

Cross-Complainants allege Cross-Defendant owed Herb and Cross-Complainants a fiduciary duty by virtue of his role as the accountant, bookkeeper of Herb and Cross-Complainants and through the position of trust and confidence he was placed in. (CC ¶43.) Cross-Complainants allege Cross-Defendant failed to act as a reasonably careful accountant, bookkeeper, and agent would have under the same or similar circumstances in performing his services for Herb and Cross-Complainants. (CC ¶44.) Cross-Complainants allege Cross-Defendant put his interests before those of Herb and Cross-Complainants, performed his services in a manner that furthered his personal agenda at the expense of Cross-Complainants, and failed to take adequate care in performing the various tasks he was entrusted with, including by: (a) soliciting offers for development of the WVC property without Cross-Complainants’ consent or knowledge so that he could partake in and profit from developing the property against Cross-Complainants’ express wishes, all while billing for his time; (b) on information and belief, disclosing the amounts of previous offers for the purchase of the WVC property to the ultimate buyer; (c) colluding with Troy for the reconveyance of real property resulting in the clearing of a deed of trust for more than $300,000 to Herb which would have inured to the Trust (and, therefore, to Cross-Complainants); and (d) purposefully delaying and obstructing the winding down Herb’s business affairs so that he could continue charging Cross-Complainants for his services. (CC ¶44.)

Cross-Complainants allege Herb also entrusted Cross-Defendant with seeing to it that his estate plans were executed and carried out in accordance with Herb’s specific intent. (CC ¶45.) Cross-Complainants allege Cross-Defendant failed to act as a reasonably careful agent would have in ensuring that those intentions were unequivocally conveyed to Esther, costing Cross-Complainants millions of dollars in the Probate Court Action and potentially even more if Esther prevails in pursuing her demands. (CC ¶45.)

Cross-Complainants allege they were substantially harmed by Cross-Defendant’s breaches of his fiduciary duty and failure to conduct himself with the utmost good faith and in the best interests of Cross-Complainants. (CC ¶46.) Cross-Complainants allege Cross-Defendant’s breaches of his fiduciary duty were a substantial factor in bringing about Defendant’s harm. (CC ¶46.)

Cross-Complainants fail to sufficiently allege a fiduciary duty owed to them by Cross-Defendant under law. (Tri-Growth Centre City, Ltd., 216 Cal.App.3d at pg. 1150.)

Accordingly, Cross-Defendant’s demurrer to the 3rd cause of action is sustained with 20 days leave to amend.

The required elements for fraud by concealment are: (1) Defendant concealed or suppressed a material fact; (2) defendant was under a duty to disclose the fact to the plaintiff; (3) defendant intentionally concealed or suppressed the fact with the intent to defraud the plaintiff; (4) plaintiff was unaware of the fact and would not have acted in the same way knowing of the concealed or suppressed fact; (5) causation; and (6) the plaintiff sustained damage. (Boschma v. Home Loan Center, Inc. (2011) 198 Cal.App.4th 230, 248.) Fraud by nondisclosure or concealment involves the failure to make a full and fair disclosure of known facts connected with the matter about which a party has assumed to speak, under circumstances in which there is a duty to speak. (SCC Acquisitions, Inc. v. Central Pacific Bank (2012) 207 Cal.App.4th 859, 860.)

Plaintiffs are required to allege the factual basis for each of the elements of a fraud claim with specificity despite the general policy favoring liberal construction of pleadings on demurrer. (See Goldrich v. Natural Y Surgical Specialties, Inc. (1994) 25 Cal.App.4th 772, 782-783.) “To establish fraud through nondisclosure or concealment of facts, it is necessary to show the defendant ‘was under a legal duty to disclose them.’ [Citation.]” (OCM Principal Opportunities Fund v. CIBC World Markets Corp. (2007) 157 Cal.App.4th 835, 845.)

Cross-Complainants allege Cross-Defendant owed Cross-Complainants a fiduciary duty by virtue of Cross-Defendant’s role as an accountant, bookkeeper, independent contractor, and agent. (CC ¶49.) Cross-Complainants allege Cross-Defendant intentionally failed to disclose certain material facts to Cross-Complainants which he had a duty to disclose including, but not limited to: (a) offers for the development of the WVC property which Cross-Defendant solicited without Cross-Complainants’ acquiescence or knowledge and also billed his time for; (b) Herb’s inadvertent reconveyance of real property to Troy which resulted in the clearing of a deed of trust for $300,000 which would have inured to the Trust and, therefore, to Cross-Complainants; and (c) the basis for various inflated and gross overcharges for his services. (CC ¶49.)

Cross-Complainants allege they were not otherwise aware of the facts Cross-Defendant intentionally concealed or failed to disclose. (CC ¶50.) Cross-Complainants allege had Cross-Defendant not omitted the information and had Cross-Complainants known sooner of the information Cross-Defendant concealed and suppressed, Cross-Complainants reasonably would have acted differently, including by proceeding with the sale of the WVC property and acting sooner to investigate and remedy Troy’s theft. (CC ¶51.) Cross-Complainants allege Cross-Defendant’s misrepresentations were made with knowledge that the effect of concealing those material facts would cause Cross-Complainants to act or refrain from acting a certain way with respect to their interests. (CC ¶52.) Cross-Complainants allege they have been harmed as a direct result of the fraud, deceit, and other wrongful conduct perpetuated by Cross-Defendant in an amount according to proof. (CC ¶53.) Cross-Complainants allege Cross-Defendant’s concealment and resulting fraud was a substantial factor in causing Cross-Complainants harm. (CC ¶54.)

Cross-Complainants fail to allege Cross-Defendant owed them a fiduciary duty under law. (LiMandri, 52 Cal.App.4th at pg. 336.) In the absence of an allegation of a fiduciary relationship, Cross-Complainants fail to allege some sort of transaction between the parties. (Id. at pg. 337.)

Accordingly, Cross-Defendant’s demurrer to Cross-Complainants’ 4th cause of action is sustained with 20 days leave to amend.

The elements for intentional interference with prospective economic advantage are: (1) the existence of a prospective economic relationship with the probability of future economic benefit to plaintiff; (2) defendant’s knowledge of the relationship and intent to disrupt it; (3) actual disruption of the relationship; (4) caused by the defendant’s wrongful and unjustified conduct; and (5) plaintiff suffered damages as a result. (Youst v. Longo (1987) 43 Cal.3d 64, 71.) Further, the interference must be wrongful by some measure beyond the fact of the interference itself. (Della Penna v. Toyota Motor Sales (1995) 11 Cal.4th 376, 393; see Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1153 [plaintiff may plead a specific intent to interfere or, alternatively, that defendant knew the interference was certain or substantially certain to occur as a result of its action]; CACI 2202.)

Cross-Complainants allege they had existing business relationships and prospective business relationships. (CC ¶57.) Cross-Complainants allege there was a probability of future economic benefit from Cross-Complainants’ existing and prospective business relationships, for example, Cross-Complainants had an existing business relationship with the buyer of the WVC property that would have resulted in a future financial benefit to Cross-Complainants. (CC ¶57.) Cross-Complainants allege Cross-Defendant knew of Cross-Complainants’ relationships with third parties that were intended to wind down Herb’s business and estate affairs, including with the buyer of the WVC property. (CC ¶58.) Cross-Complainants allege Cross-Defendant engaged in wrongful conduct with the intention to disrupt Cross-Complainants’ relationships with third parties, including with the buyer of the WVC property. (CC ¶58.)

Cross-Complainants allege Cross-Defendant’s wrongful conduct includes: (1) withholding material information and concealed lucrative offers from Cross-Complainants in order to stall the winding down of Herb’s business and estate affairs and keep billing for his services; (2) intentionally interfering with Cross-Complainants’ relationship with the buyer of the WVC property by soliciting offers for development of the WVC property behind the backs of Cross-Complainants. (CC ¶59.) Cross-Complainants allege Cross-Defendant knew they had no intention of developing the property and were looking to sell it as soon as practicable. (CC ¶59.) Cross-Complainants allege Cross-Defendant intentionally interfered and caused delay because he intended to manage the development of the WVC property and profit financially from the project; and (3) on information and belief, Cross-Defendant disclosed the amounts of other offers on the WVC property to the buyer resulting in a lower final selling price. (CC ¶59.)

Cross-Complainants allege Cross-Defendant intended for his fraud, deceit, and other wrongful conduct to interfere with Cross-Complainants’ relationships with third parties, including the buyer of the WVC property. (CC ¶60.) Cross-Complainants allege existing and prospective relationships were disrupted as a result of Cross-Defendant’s wrongdoing. (CC ¶61.) Cross-Complainants allege for example, their economic relationship with the buyer of the WVC property was disrupted as a result of Cross-Defendant’s rogue solicitation of potential developers instead of focusing on completing the sale of the WVC property and facilitating the sale as he was being paid to do. (CC ¶61.) Cross-Complainants allege Cross-Defendant’s actions resulted in a delay of the sale of the WVC property and a lower selling price from the buyer than Cross-Complainants would have received had Cross-Defendant not interfered. (CC ¶61.) Cross-Complainants allege they were harmed by Cross-Defendant’s fraud, deceit, and other underhanded actions and interference with Cross-Complainants relationships, including through delay in the sale of the WVC property. (CC ¶62.) Cross-Complainants allege Cross-Defendant’s conduct was a substantial factor in causing Cross-Complainants harm. (CC ¶63.)

Cross-Complainants fail to allege Cross-Defendant’s alleged interference with the sale of the property was wrongful by some measure beyond the fact of the interference itself. Cross-Complainants fail to allege Cross-Defendant’s specific intent to interfere or that Cross-Defendant knew that the alleged interference was certain or substantially certain to occur as a result of his actions. (Korea Supply Co., 29 Cal.4th at pg. 1153.)

A cause of action for intentional interference with contractual relations requires the following elements: (1) a valid contract between plaintiff and third party; (2) Defendant’s knowledge of that; (3) Defendant’s intentional acts designed to induce disruption of the relationship; (4) actual disruption; and (5) resulting damage. (Reeves v. Hanlon (2004) 33 Cal.4th 1140, 1148; Scripps Clinic v. Superior Court (2003) 108 Cal.App.4th 917, 929; Golden W. Baseball Co. v. City of Anaheim (1994) 25 Cal.App.4th 11, 50 [to show disruption, “[i]t is sufficient to show the defendant’s conduct made the plaintiff’s performance . . . under the contract more burdensome or costly.”].)

Cross-Complainants allege Cross-Complainants entered into valid contracts with third parties in connection with selling certain real properties and otherwise winding down Herb’s affairs, including with the buyer of the WVC property in connection with the sale of the WVC property. (CC ¶73.) Cross-Complainants allege Cross-Defendant knew of the contracts Cross-Complainants entered into, including with the buyer of the WVC property. (CC ¶74.) Cross-Complainants allege Cross-Defendant engaged in conduct that: (a) prevented the performance of Cross-Complainants’ contracts with third parties (including the buyer of the WVC property); or (b) made performance of those contracts more expensive, complex, complicated, and/or difficult. For example, Cross-Defendant withheld material information from Cross-Complainants that would have facilitated and expedited the performance of those contracts and stalled the winding down of Herb’s business and estate affairs, including the sale of the WVC property. The contract with the buyer of the WVC property was disrupted as a result of Pattison’s rogue solicitation of potential developers instead of focusing on completing the sale of the WVC property and facilitating the sale as he was being paid to do. (CC ¶75.)

Cross-Complainants allege Cross-Defendant through his wrongful and fraudulent conduct, intended to disrupt Cross-Complainants’ performance of their contracts with third parties to sell real properties and wind down Herb’s business and estate affairs, including with the buyer of the WVC property. (CC ¶76.)

Cross-Complainants allege they were harmed by Cross-Defendant’s fraud, deceit, and other underhanded actions and interference with Cross-Complainants’ relationships. (CC ¶77.) Cross-Complainants allege Cross-Defendant’s conduct was a substantial factor in causing Cross-Complainants’ harm. (CC ¶78.)

As stated with regards to the 5th cause of action, Cross-Complainants fail to allege Cross-Defendant’s wrongful acts beyond conclusory allegations.

Accordingly, Cross-Defendant’s demurrer to Cross-Complainants’ 7th cause of action is sustained with 20 days leave to amend.

Cross-Defendant’s unopposed demurrer to Cross-Complainants’ 3rd, 4th, 5th, and 7th causes of action is sustained with 20 days leave to amend.

In light of the Court’s ruling on Cross-Defendant’s demurrer, Cross-Defendant’s motion to strike is denied as moot.

Hon. Daniel M. Crowley

Judge of the Superior Court