Judge: David A. Hoffer, Case: 30-2022-1251838, Date: 2022-09-19 Tentative Ruling
Defendants Brian M. Browning (“Browning” individually) and Twenty Paces, Inc.’s (“TPI” individually; “Defendants” together with Browning) Demurrer to plaintiff Castle Mortgage Corporation’s (“Plaintiff”) Complaint is SUSTAINED in part and OVERRULED in part.
Sustained as to causes of action (“COA”) Nos. 3 and 6.
Overruled with leave to amend as to COA Nos. 1, 2, and 5.
Defendants demur to COA Nos. one, two, three, five, and six on the bases they 1) fail to state sufficient facts to constitute a cause of action, and 2) they are uncertain. (Civ. Proc. Code § 430.10(e) and (f).)
1) COA No. 1 – Breach of Contract
“To state a cause of action for breach of contract, a party must plead the existence of a contract, his or her performance of the contract or excuse for nonperformance, the defendant's breach and resulting damage. [Citation.] If the action is based on alleged breach of a written contract, the terms must be set out verbatim in the body of the complaint or a copy of the written agreement must be attached and incorporated by reference.” (Harris v. Rudin, Richman & Appel (1999) 74 Cal. App. 4th 299, 307.)
Plaintiff alleged the Agreement and attached a copy of it to the Complaint. (Complaint ¶ 9, Ex. A.) The Agreement included calculations on how Browning’s compensation was determined. (Complaint ¶ 16.) Browning undertook to submit invoices and collect funds from Plaintiff individually and through TPI without regard to the compensation system in the Agreement. (Complaint ¶ 17.) Browning terminated his employment after receiving funds from Castle, both individually and through TPI while Browning’s calculation was still underway and before an accounting had been completed, which resulting in an overpayment of $150,000. (Complaint ¶ 18.) Plaintiff alleges Browning’s taking of the $150,000 before a complete accounting had been done and Browning’s refusal to return the money constituted a breach of the Agreement. (Complaint ¶ 19.) Plaintiff alleged it performed each and every covenant, condition, and promise required it under the Agreement. (Complaint ¶ 7.) Although the “performance” allegation is a conclusion of law, Plaintiff also alleged that it employed and compensated Browning, which was required of Plaintiff under the Agreement. (Complaint ¶¶ 14, 17-18.)
Plaintiff has pled sufficient facts to support this COA. Additionally, the COA is not uncertain as it is not so unclear that Defendants cannot reasonably determine what issues are to be admitted or denied or what counts or claims are directed against Defendants.
The demurrer is overruled as to this COA.
2) COA No. 2 – Fraudulent Concealment
“To state a claim for fraudulent concealment under California law, a plaintiff must allege: “ ‘(1) a misrepresentation (false representation, concealment, or nondisclosure); (2) knowledge of falsity (or scienter); (3) intent to defraud, i.e., to induce reliance; (4) justifiable reliance; and (5) resulting damage.’ ”” (In re Toyota Motor Corp. Unintended Acceleration Mktg., Sales Practices, & Prod. Lab. Litig., 754 F. Supp. 2d 1145, 1189 (C.D. Cal. 2010) [Toyota]. “A plaintiff may demonstrate a duty to disclose in four circumstances: “(1) when the defendant is [] in a fiduciary relationship with the plaintiff; (2) when the defendant had exclusive knowledge of material facts not known to the plaintiff; (3) when the defendant actively conceals a material fact from the plaintiff; and (4) when the defendant makes partial representations but also suppresses some material fact.”” (Id.) Concealment is, “[t]he suppression of a fact, by one who is bound to disclose it, or who gives information of other facts which are likely to mislead for want of communication of that fact.” (Civ. Code § 1710(3).)
Plaintiff alleged Defendants intentionally concealed that they would manipulate Plaintiff’s compensation system and that Browning would leave his position with Plaintiff before an accounting could be completed to determine what Defendants were actually owed. (Complaint ¶ 23.) Defendants allegedly undertook a series of transactions designed to obtain more funds from Plaintiff than what was owed. (Complaint ¶ 22.) Plaintiff was at all times unaware Defendants would conceal those facts and entered the Agreement and transactions in good faith. (Complaint ¶¶ 21, 24.) In reliance on Browning’s representations of good faith, Plaintiff advanced $150,000 to Defendants with the understanding Browning would remain with Plaintiff at least until such time as the compensation and accounting was complete. (Id.) Plaintiff sustained damages as the result of Defendants’ actions in the amount of at least $150,000. (Complaint ¶ 25.) Plaintiff has also pled an employee-employer relationship between Plaintiff and Browning wherein Browning had the duty to advise Plaintiff that Browning would be employed for only a short period of time, that Defendants would accept funds in excess of what Browning was owed, and return funds in excess of what was owed before Browning left his position. (Complaint ¶ 23.)
Plaintiff has pled sufficient facts to support this COA. This COA is not uncertain.
The demurrer is overruled as to this COA.
3) COA No. 3 – Declaratory Relief
“To qualify for declaratory relief, [a party] would have to demonstrate its action presented two essential elements: ‘(1) a proper subject of declaratory relief, and (2) an actual controversy involving justiciable questions relating to [the party's] rights or obligations.’” (Jolley v. Chase Home Fin., LLC (2013) 213 Cal. App. 4th 872, 909.) “Declaratory relief generally operates prospectively to declare future rights, rather than to redress past wrongs.” [Emphasis added.] (Id.) “A complaint for declaratory relief is legally sufficient if it sets forth facts showing the existence of an actual controversy relating to the legal rights and duties of the respective parties under a written instrument and requests that these rights and duties be adjudged by the court.” (Maguire v. Hibernia Sav. & Loan Soc. (1944) 23 Cal. 2d 719, 728.) “The purpose of a declaratory judgment is “to serve some practical end in quieting or stabilizing an uncertain or disputed jural relation.” (Id., at 729.)
“Declaratory relief operates prospectively, serving to set controversies at rest. If there is a controversy that calls for a declaration of rights, it is no objection that past wrongs are also to be redressed; but there is no basis for declaratory relief where only past wrongs are involved. Hence, where there is an accrued cause of action for an actual breach of contract or other wrongful act, declaratory relief may be denied.” [Emphasis added.] (Osseous Techs. of Am., Inc. v. DiscoveryOrtho Partners LLC (2010) 191 Cal. App. 4th 357, 366.) “Moreover, under Code of Civil Procedure section 1061, “[t]he court may refuse to exercise the power granted by this chapter in any case where its declaration or determination is not necessary or proper at the time under all the circumstances.” This is a discretionary determination, subject to reversal only if that discretion is abused.” (Otay Land Co. v. Royal Indem. Co. (2008) 169 Cal. App. 4th 556, 563.)
Though this COA alleges there is a controversy between the parties as to the duties to one another under the Agreement, it appears to be nothing more than a breach of contract. Plaintiff is actually seeking a declaration as to the right to the $150,000 that Defendants allegedly improperly took. This COA seeks a declaration as to past wrongs and not as to future rights. This issue and damages related thereto can adequately be determined under the breach of contract COA. Further, the Agreement, which covered the terms of Browning’s ongoing employment, would not be ongoing once Browning left his employment position with Plaintiff in March 2022. Thus, there is no need to determine parties’ future rights under the Agreement.
At this point, as Browning in no longer employed by Plaintiff, the only issue to determine is whether Defendants breached the Agreement and took more money than was permitted under the Agreement. This is a redress of past wrongs and can fully be adjudicated under the other COA and specifically the breach of contract COA. As pled, there is nothing for the court to declare regarding duties of the parties to one another.
The demurrer is sustained as to this COA with 20-days leave to amend.
4) COA No. 5 – Constructive Trust
“Three conditions must be shown to impose a constructive trust: (1) a specific, identifiable property interest, (2) the plaintiff's right to the property interest, and (3) the defendant's acquisition or detention of the property interest by some wrongful act.” (Higgins v. Higgins (2017) 11 Cal. App. 5th 648, 659.) “A constructive trust is an involuntary equitable trust created by operation of law as a remedy to compel the transfer of property from the person wrongfully holding it to the rightful owner. [Citations.] The essence of the theory of constructive trust is to prevent unjust enrichment and to prevent a person from taking advantage of his or her own wrongdoing. [Citations.]” [Citation.] Imposition of “[a] constructive trust is an equitable remedy to compel the transfer of property by one who is not justly entitled to it to one who is. [Citation.]” (Am. Master Lease LLC v. Idanta Partners, Ltd. (2014) 225 Cal. App. 4th 1451, 1485.)
“In an action for constructive trust one must plead facts constituting the cause of action, such as fraud, breach of fiduciary duty, etc., and specifically identifiable property.” (Ehret v. Ichioka (1967) 247 Cal. App. 2d 637, 642.)
As noted, supra, Plaintiff has pled sufficient facts to support the Breach of Contract and Fraudulent Concealment COA. Plaintiff has also pled a specific identifiable property in the $150,000 it claims Defendants improperly took. Plaintiff has pled sufficient facts to support this COA and it is not uncertain.
The demurrer is overruled as to this COA.
5) COA No. 6 – Common Counts
“Although such an action [under Common Counts] is one at law, it is governed by principles of equity [Citations] It may be brought “... wherever one person has received money which belongs to another, and which ‘in equity and good conscience’, or in other words, in justice and right, should be returned. ... The plaintiff's right to recover is governed by principles of equity, although the action is one at law.” (Mains v. City Title Ins. Co. (1949) 34 Cal. 2d 580, 586.)
“In the common law action of general assumpsit, it is customary to plead an indebtedness using “common counts.” [Citation.] In California, it has long been settled the allegation of claims using common counts is good against special or general demurrers. [Citation.] The only essential allegations of a common count are “(1) the statement of indebtedness in a certain sum, (2) the consideration, i.e., goods sold, work done, etc., and (3) nonpayment.” (4 Witkin, op. cit. supra, § 508, at p. 543.) A cause of action for money had and received is stated if it is alleged 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.' ” (Farmers Ins. Exch. v. Zerin (1997) 53 Cal. App. 4th 445, 460.)
There are essentially different classifications of common counts, including common counts for indebtedness, money had and received, open book, account stated, etc. Here, it appears Plaintiff should plead a common count of money had and received, but instead is pleading one of general indebtedness. The former occurs when money is in the possession of or taken by a party and is not returned to the proper owner. The latter occurs when one party performs work for (or sells something to) a second party, the second party owes the first party payment for second party’s efforts, but the first party has not made payment. Here, Plaintiff did not perform work for (or sell goods to) Defendants for which it would be able to recover on the debt. Instead, in other parts of the Complaint, it appears Plaintiff is alleging Defendants improperly took money that belonged to Plaintiff, but are not returning it.
This COA does not plead sufficient facts to support the theory it asserts against Defendants. It is also uncertain as there are no facts alleged how/what the money received was for the use and benefit of Plaintiff, or how/why Defendants owe a payment to Plaintiff as there are no allegations Plaintiff ever worked for Defendants or sold goods to Defendants.
The demurrer is sustained as to this COA with 20-days leave to amend.
Defendants are ordered to give notice.