Judge: Daniel S. Murphy, Case: 21STCV40146, Date: 2022-10-12 Tentative Ruling

Case Number: 21STCV40146    Hearing Date: October 12, 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 West Shores Realty, Inc., Amir Alkhayat, Jr., The Wildy Group, LLC, Keenan Wildy, Sarah Wildy, West Shores Escrow, and Celeste Willingham (the brokers) presently demur to the cross-complaint.

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.)

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 Afsar Decl. ¶¶ 4-5.)

DISCUSSION

I. Contract Claims (First and Third Causes of Action)

To establish breach of contract, a plaintiff must show: (1) the contract existed, (2) the plaintiff’s performance of the contract or excuse for nonperformance, (3) the defendant’s breach, and (4) the resulting damage to the plaintiff. (Richman v. Hartley (2014) 224 Cal. App. 4th 1182, 1186.) “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.)

Cross-Defendants argue that nonparties to the listing agreement must be dismissed from the contract claims. They point out that the contract attached to the cross-complaint shows the signatories to be Toni Rose Family Trust on the one hand, and Keenan Wildy on behalf of West Shores Realty, Inc. on the other. (Cross-Compl., Ex. 1.) “Generally, a person who is not a party to an . . . agreement is not bound by it.” (Flores v. Evergreen at San Diego, LLC (2007) 148 Cal.App.4th 581, 587.) Cross-Complainant does not address the fact that on the face of the complaint and the incorporated contract, the agreement was between Toni Rose Family Trust and West Shores Realty, Inc. only. Because the implied covenant of good faith and fair dealing is an implied contract term that must be tied to an existing contract, that claim also cannot be maintained against nonparties to the contract.

The demurrer to the first and third causes of action is SUSTAINED without leave to amend as to Cross-Defendants Amir Alkhayat, Jr., The Wildy Group, LLC, Sarah Wildy, West Shores Escrow, and Celeste Willingham.

II. Fraud (Fifth, Seventh, and Eighth Causes of Action)

“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.) “[C]onstructive fraud comprises any act, omission or concealment involving a breach of legal or equitable duty, trust or confidence which results in damage to another even though the conduct is not otherwise fraudulent. Most acts by an agent in breach of his fiduciary duties constitute constructive fraud.” (Michel v. Moore & Associates, Inc. (2007) 156 Cal.App.4th 756, 763.) However, “conduct amounting to a breach of contract becomes tortious only when it also violates a duty independent of the contract arising from principles of tort law. An omission to perform a contract obligation is never a tort, unless that omission is also an omission of a legal duty.” (Erlich v. Menezes (1999) 21 Cal.4th 543, 551, internal citations omitted.)

Cross-Defendants argue that Cross-Complainant is attempting to transform a breach of contract into fraud. However, the fraud claims arise from independent legal duties. For example, Cross-Defendants allegedly told Cross-Complainant that her property was in foreclosure and had to be sold within two days. (Cross-Compl. ¶ 95.) Cross-Defendants also allegedly misrepresented that they were licensed real estate agents. (Id., ¶ 96.) Cross-Defendants allegedly failed to garner the highest purchase price for the property because they intended to sell the property to Plaintiffs, whom they knew. (Id., ¶ 101.) Cross-Defendants allegedly effectuated their plan by forging Cross-Complainants’ signature on a purchase contract. (Id., ¶ 102.)

 These acts constitute misrepresentations separate from the mere failure to perform a contract term, as well as deceptive acts by a fiduciary resulting in constructive fraud. (See Michel, supra, 156 Cal.App.4th at pp. 762-63 [“a real estate agent, as a fiduciary, is liable to his principal for constructive fraud even though his conduct is not actually fraudulent”].)

The demurrer is OVERRULED as to the fifth, seventh, and eighth causes of action.

III. Declaratory Relief (Tenth Cause of Action)

“Any person interested under a written instrument . . . or under a contract . . . may, in cases of actual controversy relating to the legal rights and duties of the respective parties, bring an original action or cross-complaint in the superior court for a declaration of his or her rights and duties . . . arising under the instrument or contract.” (Code Civ. Proc., § 1060.)  

Cross-Complainant seeks a judicial declaration of the following: (a) that the listing/broker agreement is void; (b) that the real estate purchase contract is void; and (c) that the escrow documents be rescinded. (Cross-Compl. ¶ 114.) As discussed above, only two of the moving Cross-Defendants are parties to the listing agreement. The remaining Cross-Defendants cannot be involved in a declaratory relief action regarding a contract they did not sign.

The demurrer to the tenth cause of action is SUSTAINED without leave to amend as to Cross-Defendants Amir Alkhayat, Jr., The Wildy Group, LLC, Sarah Wildy, West Shores Escrow, and Celeste Willingham.  

IV. Breach of Fiduciary Duties (Second Cause of Action)

The elements of a breach of fiduciary duty claim are: (1) the existence of a fiduciary relationship; (2) its breach; (3) causation; and (4) damage proximately caused by that breach. (Knox v. Dean (2012) 205 Cal.App.4th 417, 432-33.)

While Cross-Defendants’ notice of motion lists the fiduciary duty claim, its moving papers otherwise contain no analysis of why this claim is deficient. Cross-Defendants address the fiduciary duty claim for the first time in reply. (See Marriage of Khera & Sameer (2012) 206 Cal.App.4th 1467, 1477 [“Obvious reasons of fairness militate against consideration of an issue raised initially in the reply brief . . .”].)

In any case, Cross-Defendants’ argument is unconvincing. Cross-Defendants argue that the nonparties to the listing agreement cannot be liable for fiduciary duties. They cite no authority for this proposition. The cross-complaint alleges that Cross-Defendants represented Cross-Complainant as her real estate agents and thereby owed her fiduciary duties. (Cross-Compl. ¶¶ 47-48; see Michel, supra, 156 Cal.App.4th at pp. 762-63 [recognizing that real estate agents are fiduciaries].) This fiduciary relationship can exist even without a contract. As discussed above, Cross-Defendants’ alleged actions violate duties independent of those imposed by contract terms.

The demurrer is OVERRULED as to the second cause of action.

V. UCL (Fourth Cause of Action)

            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.)  

              As with the fiduciary duty claim, Cross-Defendants failed to address this claim in their moving papers, and their reply argument is unconvincing for the same reasons. Cross-Defendants argue that a UCL claim cannot be maintained against nonparties to the listing agreement. However, a UCL claim does not require a contractual relationship. Cross-Defendants’ conduct, as discussed herein, can be considered unlawful, unfair, or fraudulent and thereby serve as the predicate for a UCL claim.

            The demurrer is OVERRULED as to the fourth cause of action.

CONCLUSION

            The demurrer filed by Cross-Defendants West Shores Realty, Inc., Amir Alkhayat, Jr., The Wildy Group, LLC, Keenan Wildy, Sarah Wildy, West Shores Escrow, and Celeste Willingham is SUSTAINED in part as set forth above without leave to amend.