Judge: Daniel S. Murphy, Case: 21STCV40146, Date: 2022-08-29 Tentative Ruling

Case Number: 21STCV40146    Hearing Date: August 29, 2022    Dept: 32

BACKGROUND

            On November 1, 2021, Molly First and Colby Audette (collectively “Plaintiffs” or “Cross-Defendants”) filed this action against Sparkle S. Blount, individually and as Trustee of the Toni Rose Family Trust (“Defendant” or “Cross-Complainant”), alleging (1) specific performance, (2) breach of contract, and (3) fraud.

            The action stems from a residential purchase agreement (the “Agreement”) between Plaintiffs and Defendant whereby Defendant was to sell the real property located at 2142 S. Sycamore Ave., Los Angeles, CA 90016 (the “Property”) to Plaintiffs. Defendant allegedly reneged on the Agreement by refusing to sell the Property to Plaintiffs.

            On April 29, 2022, Defendant filed a cross-complaint against Plaintiffs and various cross-defendants, alleging that she was fraudulently induced into the sales agreement.  

            Cross-Defendants Molly First, Colby Audette, and First Audette, LLC presently demur to the cross-complaint on the grounds that no conduct is attributed to them. Cross-Defendants also move to strike portions of the cross-complaint regarding attorneys’ fees and punitive damages.  

LEGAL STANDARD

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.) When considering demurrers, courts read the allegations liberally and in context. (Taylor v. City of Los Angeles Dept. of Water and Power (2006) 144 Cal.App.4th 1216, 1228.) In a demurrer proceeding, the defects must be apparent on the face of the pleading or by proper judicial notice. (Code Civ. Proc., § 430.30, subd. (a).) A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. (SKF Farms v. Superior Court (1984) 153 Cal.App.3d 902, 905.) Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed. (Id.) The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action. (Hahn, 147 Cal.App.4th at p. 747.)

Any party, within the time allowed to respond to a pleading, may serve and file a notice of motion to strike the whole or any part of that pleading. (Code Civ. Proc., § 435, subd. (b).) The court may, upon a motion, or at any time in its discretion, and upon terms it deems proper, strike (1) any irrelevant, false, or improper matter inserted in any pleading and (2) all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court. (Id., § 436.) The grounds for moving to strike must appear on the face of the pleading or by way of judicial notice. (Id., § 437.)

MEET AND CONFER

Before filing a demurrer or a motion to strike, the demurring or moving party is required to meet and confer with the party who filed the pleading demurred to or the pleading that is subject to the motion to strike for the purposes of determining whether an agreement can be reached through a filing of an amended pleading that would resolve the objections to be raised in the demurrer. (Code Civ. Proc., §§ 430.41, 435.5.) The Court finds that Defendant has satisfied the meet and confer requirement. (See Haven Decl. ¶ 4.)

DISCUSSION

I. Demurrer

            a. Implied Covenant of Good Faith and Fair Dealing

“The covenant of good faith and fair dealing, implied by law in every contract, exists merely to prevent one contracting party from unfairly frustrating the other party’s right to receive the benefits of the agreement actually made.” (Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 349-50.) The covenant is tied to the express terms of an existing contract, and does not serve to impose a general duty to act fairly. (See Racine & Laramie, Ltd. v. Dep't of Parks & Recreation (1992) 11 Cal.App.4th 1026, 1031-32.)

The cross-complaint fails to articulate a breach of the covenant as applied to the Plaintiffs/Cross-Defendants, who were the buyers under the purchase agreement. The cross-complaint does not allege the material terms of the contract or how Cross-Defendants’ actions frustrated Cross-Complainant’s rights under those terms. (See Cross-Complaint (“CC”) ¶ 58.) Presumably, the fundamental benefit that Cross-Complainant expected to obtain under the sale contract was the sale price. There is no indication that Cross-Defendants, the buyers, took any action to deprive Cross-Complainant of that benefit. Unfair conduct in general, untethered to the express terms of a contract, cannot form the basis for this cause of action. (See Racine & Laramie, Ltd., supra, 11 Cal.app.4th at pp. 1031-32.)

Cross-Complainant argues that Cross-Defendants violated the covenant “when they coerced Cross-Complainant to sell her property for under the market value and listing price while failing to communicate other offers made by prospective purchasers to Cross-complainant. Additionally, Cross-defendants Molly First and Colby Audette took possession of the subject property before the close of escrow.” (Opp. 6:15-21.)

However, the cross-complaint alleges that it was the other cross-defendants—Cross-Complainant’s real estate broker and lenders—that pressured her to sell the property and failed to communicate other offers. (CC ¶¶ 18-31.) None of this conduct is attributed to the buyers. Cross-Complainant does not articulate how the allegedly premature possession prior to close of escrow constitutes a breach of the implied covenant, as tied to some express term in the contract. Cross-Complainant has a trespass claim which is not subject to this demurrer. Therefore, the demurrer is SUSTAINED without leave to amend as to the third cause of action.

            b. UCL

            Business and Professions Code section 17200 prohibits unlawful, unfair, or fraudulent business acts or practices. Each of the three prongs is an independent basis for relief. (Smith v. State Farm Mutual Automobile Insurance Co. (2001) 93 Cal.App.4th 700, 718.) Unlawful conduct is defined as any practice forbidden by law. (Farmers Ins. Exchange v. Superior Court (1992) 2 Cal.4th 377, 383.) UCL actions alleging unlawful conduct “borrow” from other statutes or common law causes of action outside Section 17200.  (Klein v. Chevron U.S.A., Inc. (2012) 202 Cal.App.4th 1342, 1383.)  

              The conduct under this cause of action is attributed to the real estate brokers (CC ¶¶ 62-65) and the lenders (CC ¶¶ 66-69.) No actions are attributed to the buyers, nor can a violation of the UCL be inferred from other alleged facts. As Cross-Complainant acknowledges, the UCL “protects both consumers and competitors by promoting fair competition in commercial markets for good and service.” (Opp. 7:8-10.) This is inapplicable to Cross-Defendants, who were merely the buyers of real property pursuant to a sale contract. Therefore, the demurrer is SUSTAINED without leave to amend as to the fourth cause of action.

            c. Fraud

“The elements of fraud that will give rise to a tort action for deceit are: ‘(a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.’” (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 974, quoting Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.) Fraud must be pleaded with specificity rather than with general and conclusory allegations. (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184.) The specificity requirement means a plaintiff must allege facts showing how, when, where, to whom, and by what means the representations were made. (Lazar, supra, 12 Cal.4th at p. 645.)

As discussed above, no conduct is alleged against the buyers. Additionally, no specific statements are attributed to the buyers. The misrepresentations that the cross-complaint is able to articulate are attributed to the other cross-defendants. (See, e.g., CC ¶ 18 [Ms. Wildy misrepresented to Ms. Blount that the property was in foreclosure]; ¶ 23 [Ms. Wildy failed to inform Ms. Blount that she is not a licensed real estate agent and has close ties with the listing agent broker]; ¶ 29 [Sarah Wildy, Keenan Wildy, West Shores Realty, and Amir Al-Khayat failed to communicate other offers for the property].)

In opposition, Cross-Complainant argues that “[a]s real estate agents purchasing with the intent to resell the property, Cross-Defendants Molly First, Colby Audette, and First Audette, LLC owed Cross-Complainant fiduciary duties.” (Opp. 8:1-4.) However, even if Cross-Defendants are real estate agents, they are not alleged to have been Cross-Complainant’s real estate agents for purposes of this particular sale. There is no basis for Cross-Defendants to owe fiduciary duties to Cross-Complainant. It is apparent on the face of the cross-complaint that Cross-Defendants were merely the buyers of the subject property. Therefore, the demurrer is SUSTAINED without leave to amend as to the fifth, seventh, and eighth causes of action.

II. Motion to Strike

            a. Punitive Damages

“In an action for the breach of an obligation not arising from contract, where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice, the plaintiff, in addition to the actual damages, may recover damages for the sake of example and by way of punishing the defendant.” (Civ. Code, § 3294, subd. (a).) “‘Malice’ means conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.” (Id., subd. (c)(1).) “‘Oppression’ means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights.” (Id., subd. (c)(2).) “‘Fraud’ means an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.” (Id., subd. (c)(3).)

As discussed above, the cross-complaint does not attribute any conduct to the Cross-Defendant buyers to maintain claims for the implied covenant, UCL, or fraud. The only tort cause of action maintained against these Cross-Defendants is trespass. Even then, the only allegation is that Cross-Defendants took possession of the property before the close of escrow. (CC ¶ 33.) No facts are alleged demonstrating oppression, fraud, or malice. Therefore, the motion to strike is GRANTED as to punitive damages.

            b. Attorneys’ Fees

“Except as attorney’s fees are specifically provided for by statute, the measure and mode of compensation of attorneys and counselors at law is left to the agreement, express or implied, of the parties . . . .” (Code Civ. Proc., § 1021.) Thus, a plaintiff must set forth a statutory or contractual basis for attorney’s fees in order to recover such fees. Cross-Complainant does not do so here. Therefore, the motion to strike is GRANTED as to attorneys’ fees.

CONCLUSION

            The demurrer filed by Cross-Defendants Molly First, Colby Audette, and First Audette, LLC is SUSTAINED without leave to amend. Their motion to strike is GRANTED.