Judge: David A. Hoffer, Case: 30-2021-1194911, Date: 2022-08-08 Tentative Ruling
I. Demurrer
The general demurrer of defendants Tesla, Inc., and Tesla Energy Operation, Inc., to all seven causes of action in the complaint of plaintiff Pete Deutschman is SUSTAINED with 30 days’ leave to amend.
Without expressing any position as to the validity of a cause of action for breach of contract, the court will allow plaintiff to plead one in any amended complaint.
Defendants Tesla, Inc., and Tesla Energy Operation, Inc., demur generally to all seven causes of action in the complaint.
First and second causes of action for intentional and negligent misrepresentation, respectively. Defendants contend that the first two causes of action are defective because: (1) they are barred by the economic loss rule; and (2) they do not set forth all of the elements with sufficient particularity.
Under the economic loss rule, where a purchaser’s expectations in a sale are frustrated because the product that he or she bought is not working properly, his or her remedy lies solely in contract because he or she has suffered only “economic losses.” Food Safety Net Services v. Eco Safe Systems USA, Inc. (2012) 209 Cal.App.4th 1118, 1131. The economic loss rule requires a purchaser to recover in contract for purely economic losses due to disappointed expectations, unless he or she can demonstrate harm above and beyond a broken contractual promise. Ibid. The rule is intended to prevent the law of contract and the law of tort from dissolving one into the other. Ibid.
Because of the economic loss rule, a party alleging fraud or deceit in connection with a contract must establish tortious conduct independent of a breach of the contract itself. Food Safety Net Services v. Eco Safe Systems USA, Inc., supra, 209 Cal.App.4th at p. 1131.
The gravamen of the first cause of action is that defendants fraudulently induced plaintiff to enter into a contract for the installation of a solar energy generation system and batteries based on representations that it would fit his energy consumption needs when they knew that they could not meet those needs. Although the opposition to the demurrer states that the complaint contains allegations about property damage to the roof caused by defendants’ installation, such allegations are not found within the first or second causes of action.
The first cause of action only alleges economic damages suffered by plaintiff. Specifically, paragraph 26 alleges:
As a proximate result of Defendants’ fraudulent representation and Plaintiff’s reasonable reliance on it, Plaintiff sustained special damages consisting of excess energy bills, payments for misrepresented products and installation, and time and effort dealing with the delay tactics of defendants’ customer service. The total cost for the solar energy system is $58,227.26.
Likewise, paragraph 33, which is in the second cause of action, alleges:
Plaintiff justifiably relined on Defendants’ false representation and that reliance caused Plaintiff to enter into a contract with Defendants for a costly solar energy system that does not work to meet Plaintiffs’ needs and expectations as promised. The total cost for the solar energy system is $58,227.26.
Plaintiff also contends that the economic loss rule does not apply because the parties were in a “special relationship,” citing the fact that the energy system was designed just for him. However, nothing in the complaint suggests that the relationship between the parties was anything other than one at arm’s length.
As pled, the first and second causes of action are both barred under the economic loss rule.
The third and fourth causes of action for rescission based on fraud and mistake, respectively. The third and fourth causes of action seek rescission of the written contract that the parties entered into on 12-19-19. (Exhibit 2 to the complaint.) Defendants contend that both of these causes of action fail because rescission is a remedy and not a cause of action, citing Nakash v. Superior Court (1987) 196 Cal.App.3d 59, 70, and Dorman v. International Harvester Co. (1975) 46 Cal.App.3d 11, 13, fn. 2.
In fact, Nakash specifically states at p. 70 that “[r]escission is not a cause of action; it is a remedy. [Citations.]” (Emphasis in original.)
In opposing the demurrer, plaintiff contends that, while rescission is generally not considered to be a cause of action, courts recognize such claims under Civil Code §§ 1689 and 1692. He contends that his claims are under section 1689 because they are based on fraud and violation of consumer protection statutes.
Civil Code section 1689 does provide for rescission of contracts under specified circumstances, such as where the consent of the party rescinding “was given by mistake, or obtained through duress, menace, fraud, or undue influence, exercised by or with the connivance of the party as to whom he [or she] rescinds, or of any other party to the contract jointly interested with such party.” Civ. Code § 1689(b)(1). But this statute does change the fact that rescission is a remedy and not a cause of action.
If plaintiff seeks recission, he could plead a breach of contract and request recission as a remedy.
Fifth cause of action for money had and received. “A cause of action is stated for money had and received if the defendant is indebted to the plaintiff in a certain sum “for money had and received by the defendant for the use of the plaintiff.” Gutierrez v. Giardi (2011) 194 Cal.App.4th 925, 937. This common count is available in a great variety of situations and lies wherever one person has received money that belongs to another and should, in equity and good conscience, be paid over to the latter. Ibid.
Here, however, no claim for money had and received is made. Plaintiff claims that defendants breached their contract by failing to deliver an effective solar energy system – not by failing to deliver money. This case does not involve an agreement to pay money, a loan, or any specified sum and thus does not alleged a valid cause of action for money had and received. See 4 Witkin, Cal. Proc. 6th (2022), Plead § 563 (actions based on express contract may not be pleaded by common count in the following situations: (1) where the contract is still executory on the plaintiff’s side, i.e., where the plaintiff has not fully performed his or her obligations; (2) where the plaintiff seeks either damages for breach or specific performance; and (3) where the obligation of the defendant is something other than the payment of money).
Sixth cause of action for reformation. The sixth cause of action is for reformation of the solar agreement that is attached to the complaint as Exhibit 2.
Lemoge Electric v. County of San Mateo (1956) 46 Cal.2d 659, which is cited by defendants in their moving papers, contains an in-depth discussion of reformation at pp. 663-664:
The purpose of reformation is to correct a written instrument in order to effectuate a common intention of both parties which was incorrectly reduced to writing. [Citation.] In order for plaintiff to obtain this relief there must have been an understanding between the parties on all essential terms, otherwise there would be no standard to which the writing could be reformed. [Citations.] Section 3399 of the Civil Code incorporates this principle by providing that, under specified conditions, a written contract which does not truly express “the intention of the parties” may be revised so as to set forth “that intention.” As pointed out in Bailard v. Marden [(1951) 36 Cal.2d 703, 708], this language refers to a single intention which is entertained by both parties.
Reformation may be had for a mutual mistake or for the mistake of one party which the other knew or suspected, but in either situation the purpose of the remedy is to make the written contract truly express the intention of the parties. Where the failure of the written contract to express the intention of the parties is due to the inadvertence of both of them, the mistake is mutual and the contract may be revised on the application of the party aggrieved. [Citation.] When only one party to the contract is mistaken as to its provisions and his mistake is known or suspected by the other, the contract may be reformed to express a single intention entertained by both parties. [Citations.]
Although a court of equity may revise a written instrument to make it conform to the real agreement, it has no power to make a new contract for the parties, whether the mistake be mutual or unilateral. [Citations.]
Here, the sixth cause of action purports to seek reformation of the solar agreement. (See ¶¶ 49 and 51.) However, the crux of the problem does not appear to be the language of the contract, but its fulfillment. Nor is any cognizable mistake alleged – just of breach of what plaintiff alleges he was promised. For such a claim a reformation of the contract provides no equitable relief.
Seventh cause of action for unfair business practices. Defendants contend that plaintiff does not set forth a cognizable claim under any of the three prongs of the UCL statute and that the UCL is not pled with the specificity required for a statutory claim. (Covenant Care, Inc. v. Superior Court (2004) 32 Cal.4th 771, 790.)
Defendants’ second contention is meritorious. The seventh cause of action merely alleges in ¶ 54 that the conduct described in the complaint “was and is likely to mislead the general public” and is therefore an unfair or fraudulent business act or practice under the statute. Plaintiff does not articulate what the allegedly false representations were, who made the representations, when the representations were made, what medium was used to make the representations, or how the alleged misrepresentations would deceive members of the public. As pled, this cause of action does not contain the specificity required for a statutory claim.
II. Motion to Strike
Because the court provides leave to amend, the motion to strike is MOOT.
Defendants are ordered to give notice of this ruling.