Judge: Daniel S. Murphy, Case: 24STCV27828, Date: 2025-03-03 Tentative Ruling

Case Number: 24STCV27828    Hearing Date: March 3, 2025    Dept: 32

BACKGROUND

            On October 23, 2024, Plaintiff Cookies Retail Products, LLC filed this action against multiple defendants, asserting (1) breach of contract, (2) fraud, and (3) violation of Penal Code section 496.

            On January 21, 2025, Defendant Steven Przybyla filed the instant demurrer to the complaint. Plaintiff filed its opposition on February 18, 2025. Defendant filed his reply on February 24, 2025.

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. (Ibid.) 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, supra, 147 Cal.App.4th at 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.)

Here, Defendant did not file the requisite declaration demonstrating meet and confer efforts. (See Code Civ. Proc., § 430.41(a)(3).) However, Plaintiff does not deny that an adequate meet and confer occurred, and inadequate meet and confer is not a reason to overrule a demurrer. (Id., § 430.41(a)(4).) Thus, the Court proceeds on the merits.

DISCUSSION

I. Breach of Contract

            Defendant argues that he is not a party to the contracts attached to the complaint. However, Defendant may be liable as an alter ego of the signatory defendants. (See 347 Group, Inc. v. Hawkins (2020) 58 Cal.App.5th 209, 214 [a plaintiff may “sue the alter ego directly in an action for breach of contract”].) “To succeed on their alter ego claim, plaintiffs must be able to show (1) such a unity of interest and ownership between the corporation and its equitable owner that no separation actually exists, and (2) an inequitable result if the acts in question are treated as those of the corporation alone.” (Leek v. Cooper (2011) 194 Cal.App.4th 399, 417.) “Whether a party is liable under an alter ego theory is a question of fact.” (Id. at p. 418.)

            Here, the complaint alleges sufficient facts to support a reasonable inference of alter ego. (Compl. ¶¶ 17-22.) Similar facts were found sufficient to survive demurrer in Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 235-36. Therefore, the complaint sufficiently pleads alter ego liability against Defendant.

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

II. 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.)

Here, the complaint fails to allege any specific statements made by Defendant Przybyla, how they were made, to whom they were made, and when they were made. The allegations cited by Plaintiff in its opposition refer to “Defendants” collectively without referencing Przybyla. (See Compl. ¶¶ 46-47, 63-69.) These allegations are insufficient to satisfy the heightened requirement for pleading fraud.

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

III. Penal Code Section 496

            Penal Code section 496 criminalizes “buy[ing] or receiv[ing] any property that has been stolen or that has been obtained in any manner constituting theft or extortion, knowing the property to be so stolen or obtained.” (Pen. Code, § 496(a).) “Any person who has been injured by a violation of subdivision (a) or (b) may bring an action for three times the amount of actual damages, if any, sustained by the plaintiff, costs of suit, and reasonable attorney’s fees.” (Id., § 496(c).)

            A violation of section 496 is actionable “when property has been obtained in any manner constituting theft,” including when funds are diverted through fraudulent means. (Siry Investment, L.P. v. Farkhondehpour (2022) 13 Cal.5th 333, 361; see also Pen. Code, § 484 [defining theft to include theft by false pretenses].) However, “not all commercial or consumer disputes alleging that a defendant obtained money or property through fraud, misrepresentation, or breach of a contractual promise will amount to a theft.” (Ibid.) Rather, “a plaintiff must establish criminal intent on the part of the defendant beyond ‘mere proof of nonperformance or actual falsity.’” (Id. at pp. 361-62.) “This requirement prevents ‘[o]rdinary commercial defaults’ from being transformed into a theft.” (Id. at p. 362.)

            Here, the complaint alleges a violation of Penal Code section 496 based on “false promises and fraudulent inducement.” (Compl. ¶ 73.) However, as discussed above, Plaintiff has not adequately pled fraudulent conduct by Defendant Przybyla. Thus, the Penal Code claim fails as well.

            The demurrer is SUSTAINED as to the third cause of action.    

CONCLUSION

            Defendant Steven Przybyla’s demurrer is SUSTAINED in part as set forth above with leave to amend.