Judge: Donald F. Gaffney, Case: 8911SunsetLLCv.Ramirez, Date: 2022-10-19 Tentative Ruling
TENTATIVE RULING:
Demurrer to Complaint.
Defendant Jeffrey Horne dba Diamond West Construction demurs to the Complaint of Plaintiff 8911 Sunset LLC. For the following reasons, the demurrer is OVERRULED in part and SUSTAINED in part with leave to amend.
Third Cause of Action (Breach of Implied-in-Fact Contract)
The Third Cause of Action alleges Defendant Horne breached an implied-in-fact agreement with Plaintiff, which was created when Plaintiff entered an agreement with what he thought was Defendant Horne’s licensed dba entity.
The demurrer to the Third Cause of Action is OVERRULED.
An agent may enter into contracts with third parties. (See Civ. Code, § 2305 [“Every act which, according to this Code, may be done by or to any person, may be done by or to the agent of such person for that purpose, unless a contrary intention clearly appears”].) Civil Code Section 2334 provides that: “A principal is bound by acts of his agent, under a merely ostensible authority, to those persons only who have in good faith, and without want of ordinary care, incurred a liability or parted with value, upon the faith thereof.” “An agency is ostensible when the principal intentionally, or by want of ordinary care, causes a third person to believe another to be his agent who is not really employed by him.” (Civ. Code, § 2300.)
The elements of ostensible agency are: (i) a representation or omission by the principal leading plaintiff reasonably to believe the third person was the principal’s agent/employee; (ii) plaintiff’s justifiable reliance thereon; and (iii) plaintiff’s change of position or injury resulting from that reliance. (Markow v. Rosner (2016) 3 Cal.App.5th 1027, 1038; see also Haning, et al., Cal. Prac. Guide: Personal Injury (The Rutter Guide 2020) ¶ 2:676.)
Civil Code Section 1621 provides that: “An implied contract is one, the existence and terms of which are manifested by conduct.” “Unlike the ‘quasi-contractual’ quantum meruit theory which operates without an actual agreement of the parties, an implied-in-fact contract entails an actual contract, but one manifested in conduct rather than expressed in words. [Citation omitted.]” (Maglica v. Maglica (1998) 66 Cal.App.4th 442, 455.)
Thus, pleading an implied-in-fact contract requires the plaintiff to plead the conduct of the contracting party that replaces the express promise.
“The only distinction between an implied-in-fact contract and an express contract is that, in the former, the promise is not expressed in words but is implied from the promisor’s conduct. [Citations omitted.] Under the theory of a contract implied in fact, the required proof is essentially the same as under the first count upon express contract, with the exception that conduct from which the promise may be implied must be proved. [Citation omitted.]”
(Weitzenkorn v. Lesser (1953) 40 Cal.2d 778, 794 [citations omitted]; see also Varni Bros. Corp. v. Wine World, Inc. (1995) 35 Cal.App.4th 880, 889 [implied contract based upon appellant's distribution of wine for wine producer for many years]; Youngman v. Nevada Irrigation Dist. (1969) 70 Cal.2d 240, 247 [implied contract based upon conduct in conformance with announced practice of wage increases].)
An action based on an implied-in-fact or quasi-contract cannot lie where there exists between the parties a valid express contract covering the same subject matter. (Lance Camper Manufacturing Corp. v. Republic Indemnity Co. of America (1996) 44 Cal.App.4th 194, 203; Eisenberg v. Alameda Newspapers, Inc. (1999) 74 Cal.App.4th 1359, 1387.)
Here, the Complaint alleges facts to support the existence of an agreement between Plaintiff and Defendant Horne, based on the ostensible agency of Defendant Ramirez. Specifically, the Complaint alleges that all defendants misrepresented to Plaintiff that Ramirez and his company DWD were licensed contractors (Compl. ¶ 12) and that Defendant Horne “knew or had reason to know that Plaintiff would interpret the use of Horne’s contractor license number as an agreement by Horne to enter the [subject] agreements” (Compl. ¶ 29 [emphasis added]). These allegations support the inference that Defendant Horne should have, but did not, take any actions to dispel Plaintiff’s misunderstanding that Ramirez was an agent of Defendant Horne.
The Complaint also alleges sufficient facts to support the remaining elements of the cause of action: Plaintiff’s performance or excuse for nonperformance (Compl. ¶ 30); (iii) Defendant Horne’s breach (Compl. ¶ 31); and (iv) damage to plaintiff resulting therefrom (Compl. ¶ 25).
Fourth Cause of Action (Fraud)
The Fourth Cause of Action alleges that on several instances between 11/2019 and 01/2022, Defendants misrepresented to Plaintiff both orally and in writing that Ramirez was a licensed contractor (Compl. ¶ 34) and that Defendant Horne knowingly authorized or ratified Ramirez’s misrepresentations in exchange for financial kickbacks (Compl. ¶ 36).
The demurrer to the Fourth Cause of Action is SUSTAINED with leave to amend.
The elements of a cause of action for fraud are: (i) misrepresentation; (ii) defendant's knowledge of the statement's falsity; (iii) defendant’s intent to defraud; (iv) plaintiff’s justifiable reliance; and (v) resulting damage. (Chapman v. Skype Inc. (2013) 220 Cal.App.4th 217, 230-231; Witkin Summary of Cal Law, Torts § 676.) Fraud must be pleaded with specificity. (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216, superseded by statute on another ground as stated in California for Disability Rights v. Mervyn’s, LLC (2006) 39 Cal.4th 223, 227.) The representation must be an affirmation of fact. (Civ. Code, § 1710(1) [defining deceit, in part, to include the assertion, as a fact, of that which is not true, by one who has no reasonable ground for believing it to be true].)
Here, to the extent the Complaint alleges misrepresentations by Defendant Horne directly, that claim is not pled with specificity. (See Compl. ¶ 34.) Even if Plaintiff intended to argue Horne’s vicarious liability (which Plaintiff does not argue), the Complaint also fails to allege any fraud claim against Ramirez with specificity. (See id. ¶¶ 34-35.)
Sixth Cause of Action (Aiding & Abetting)
The Sixth Cause of Action alleges that Defendant Horne aided and abetted the wrongful acts committed by Defendant Ramirez by authorizing Ramirez to use fraudulently Defendant Horne’s contractor license in exchange for financial kickbacks.
The demurrer to the Sixth Cause of Action is OVERRULED.
The elements for adding and abetting a civil tort are: (i) Defendant’s knowledge of a tort to be committed against Plaintiff by third party; (ii) Defendant’s giving assistance or substantial encouragement to the third party; (iii) that Defendant’s conduct was a substantial factor in causing Plaintiff’s harm. (Casella v. SouthWest Dealer Services, Inc. (2007) 157 Cal.App.4th 1127, 1140-1141 [elements].) Mere knowledge that a tort was going to be committed and failure to prevent it, however, is not aiding and abetting. (CACI No. 3610.)
Here, the Complaint alleges facts to sufficiently support each element of this civil tort. Specifically, the Complaint alleges that: (i) Horne knew or had reason to know Defendant Ramirez was using Horne’s contractor license number (Compl. ¶¶ 15, 28); (ii) Horne authorized Ramirez to seek out construction projects using Horne’s contractor license number in exchange for financial kickbacks (Compl. ¶¶ 15, 28); (iii) and Horne’s actions were a substantial factor in causing Plaintiff’s harm (see Compl. ¶ 48).
Seventh Cause of Action (Violation of UCL)
The Seventh Cause of Action alleges that Defendant Horne’s acts violate the UCL.
The demurrer to the Seventh Cause of Action is OVERRULED.
Business & Professions Code Section 17200 prohibits “any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising.” Under the unlawful prong, a violation of law may be actionable as unfair competition under Cal. Business & Professions Code section 17200. (Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th 49, 81.)
“Although the unfair competition law's scope is sweeping, it is not unlimited. Courts may not simply impose their own notions of the day as to what is fair or unfair.” (Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 182.) “‘[A] practice may be deemed unfair even if not specifically proscribed by some other law.’” (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1143.) “An unfair business practice occurs when that practice offends an established public policy or when the practice is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers. . . . An unfair business practice also means the public policy which is a predicate to the action must be tethered to specific constitutional, statutory or regulatory provisions.” (Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th 49, 81 [internal citations omitted].) For allegations of unfairness to business competitors, the California Supreme Court rejected a traditional balancing test and instead now requires claims to be “tethered to some legislatively declared policy.” (Cel-Tech Commc’ns, Inc. v. L.A. Cellular Tel. Co. (1999) 20 Cal.4th 163, 186.)
The courts are divided on the correct test for consumer actions, however. (Bardin v. DaimlerChrysler Corp. (2006, Fourth Dist., Div. 3) 136 Cal.App.4th 1255, 1267.) According to some appellate courts, a business practice is “unfair” under the UCL if: (1) the consumer injury is substantial; (2) the injury is not outweighed by any countervailing benefits to consumers or competition; and (3) the injury could not reasonably have been avoided by consumers themselves. (Camacho v. Automobile Club of Southern California (2006) 142 Cal.App.4th 1394, 1403–1405.) Other courts require “that the public policy which is a predicate to a consumer unfair competition action under the ‘unfair’ prong of the UCL ... be tethered to specific constitutional, statutory, or regulatory provisions.” (Bardin v. Daimlerchrysler Corp. (2006) 136 Cal.App.4th 1255, 1260–1261.) Still others assess whether the practice “is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers ... [weighing] the utility of the defendant’s conduct against the gravity of the harm to the alleged victim.” (Id. at 1260.)
In addition, the Plaintiff must allege injury in fact and loss of money or property suffered as a result of the unfair business practices. (Bus. & Prof. Code § 17204; R & B Auto Ctr. v. Farmers Group, Inc. (2006) 140 Cal.App.4th 327, 360.) “[U]nder the UCL, standing extends to ‘a person who has suffered injury in fact and has lost money or property as a result of the unfair competition’ ([Bus. & Prof. Code,] § 17204) ....” (Kwikset Corp. v. Super. Ct. (2011) 51 Cal.4th 310, 321-322.) Injury in fact is “an invasion of a legally protected interest which is (a) concrete and particularized, [citations]; and (b) ‘actual or imminent, not ‘conjectural’ or ‘hypothetical.’” (Id. at p. 322 [internal quotations omitted].) With respect to lost money, one must “demonstrate some form of economic injury.” (Id. at p. 323.) Summarizing these requirements, the California Supreme Court has determined that for UCL standing, a plaintiff “must (1) establish a loss or deprivation of money . . . sufficient to qualify as injury in fact, i.e., economic injury, and (2) show that that economic injury was the result of, i.e., caused by, the unfair business practice ....” (Id., at p. 322.) “[T]he standards for establishing standing under section 17204 and eligibility for restitution under section 17203 are wholly distinct. [Citation omitted.]” (Id., at p. 336.) Standing is not dependent on eligibility for restitution. (Ibid.) In fact, plaintiffs who cannot demonstrate a compensable loss or entitlement to restitution would still have standing under section 17204 to argue for their entitlement to restitution. (Ibid.)
Here, regardless of the test applied, the Complaint sufficiently alleges an unfair business practice—namely, Defendant Horne’s permitting and condoning the fraudulent use of his contractor’s license. (See Compl. ¶ 15.) The Complaint also alleges facts to show Plaintiff suffered injury in fact. (Compl. ¶¶ 19, 54.)
Special Demurrer
The special demurrers are OVERRULED. The special demurrer is moot as to the Fourth Cause of Action. The remaining challenged claims are not so poorly pled that Moving Defendant Horne cannot reasonably determine what issues must be admitted or denied, or what counts or claims are directed against him or her. (See Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 616.)
Moving Defendant to give notice.
Motion to Strike
Defendant Jeffrey Horne dba Diamond West Construction moves to strike portions of to the Complaint of Plaintiff 8911 Sunset LLC. For the following reasons, the motion is DENIED in part and GRANTED in part with leave to amend.
Pursuant to Code of Civil Procedure Section 436 the court may, upon a motion made or at any time in its discretion, strike out “any irrelevant, false, or improper matter inserted in any pleading.” “Irrelevant” matters include allegations not essential to the claim, allegations neither pertinent to nor supported by an otherwise sufficient claim, or a demand for judgment requesting relief not support by the allegations of the complaint. (Code Civ. Proc., § 431.10(b).)
Fourth, Sixth, and Seventh Causes of Action
The motion to strike is DENIED to the extent it seeks to strike the fourth, sixth, and seventh causes of action.
Failure to state facts sufficient to state a cause of action is ground for general demurrer, but not for a motion to strike. (Ferraro v. Camarlinghi (2008) 161 Cal.App.4th 509, 529; Pierson v. Sharp Memorial Hospital, Inc. (1989) 216 Cal.App.3d 340, 342). Therefore, the court denies the motion as to these causes of action.
Punitive Damages
The motion to strike is DENIED as moot as to paragraph 40 and DENIED as to paragraph 50.
Punitive damages are available in actions “for breach of an obligation not arising from contract.” (See Civ. Code, § 3294(a).) In the absence of an independent tort, punitive damages may not be awarded for breach of contract, even where the defendant’s conduct in breaching the contract was willful, fraudulent or malicious. (Cates Constr., Inc. v. Talbot Partners (1999) 21 Cal.4th 28, 61.)
To plead a claim to recover punitive damages, a plaintiff must plead and show one of the following bases for imposition of exemplary damages, i.e. malice, oppression, or fraud. (Civ. Code, § 3294(a).) The code defines “malice” to mean “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.” (Civ. Code, § 3294(c)(1).) The Code defines “fraud” to mean “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.” (Civ. Code, § 3294(c)(3).)
The allegations that Horne intentionally concealed Ramirez’s lack of qualifications and conspired with Ramirez to dupe Plaintiff sufficiently alleges malicious conduct. (See, e.g., Compl. ¶¶ 12-15.)
Attorney’s Fees
The motion is GRANTED with leave to amend as to the attorney’s fees claim.
“If a plaintiff prevails in an unfair competition law claim, it may seek attorney fees as a private attorney general pursuant to Code of Civil Procedure section 1021.5.” (Davis v. Ford Motor Credit Co. (2009) 179 Cal.App.4th 581, 600.) There are three elements to a private attorney general fee award under the statute: (1) “the enforcement of an important right affecting the public interest;” (2) the conferring of a “significant benefit” on “the general public or a large class of individuals;” and (3) “the necessity and financial burden of private enforcement renders the award appropriate.” (Jaramillo v. County of Orange (2011) 200 Cal.App.4th 811, 829; see also, Norberg v. California Coastal Commission (2013) 221 Cal.App.4th 535, 540.)
Here, there are insufficient facts alleged in the Complaint showing the conferring of a significant benefit to the general public or a large class of individuals. Although the Complaint alleges a conspiracy to defraud customers of Ramirez, there is no allegation to show that class of consumers constitutes a “large class of individuals.” Also, the complaint does not address the necessity or financial burden of private enforcement.
Should Plaintiff desire to file an amended complaint that addresses the issues in this ruling, Plaintiff shall file and serve the amended complaint within 30 days of service of the notice of ruling.
Moving Defendant to give notice.