Judge Donald F. Gaffney, Case Farjami Titlehere Farjami LLP v. Frost 2022-08-24 Tentative Ruling

TENTATIVE RULING

Defendant William Guerry’ Demurrer to the First Amended Complaint (“FAC”) is SUSTAINED with fifteen (15) days leave to amend as to the First, Second and Fifth Cause of Action. The Demurrer is OVERRULED as to the Fourth Cause of Action.

Demurrer: A demurrer presents an issue of law regarding the sufficiency of the allegations set forth in the complaint. (Lambert v. Carneghi (2008) 158 Cal.App.4th 1120, 1126.) The challenge is limited to the “four corners” of the pleading (which includes exhibits attached and incorporated therein) or from matters outside the pleading which are judicially noticeable under Evidence Code §§ 451 or 452. Although California courts take a liberal view of inartfully drawn complaints, it remains essential that a complaint set forth the actionable facts relied upon with sufficient precision to inform the defendant of what plaintiff is complaining, and what remedies are being sought. (Leek v. Cooper (2011) 194 Cal.App.4th 399, 413.)

On demurrer, a complaint must be liberally construed. (Code Civ. Proc., § 452; Stevens v. Superior Court (1999) 75 Cal.App.4th 594, 601.) All material facts properly pleaded, and reasonable inferences, must be accepted as true. (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-67.)

Uncertainty: “‘[D]emurrers for uncertainty are disfavored, and are granted only if the pleading is so incomprehensible that a defendant cannot reasonably respond.’. . . ‘A demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures.’” (A.J. Fistes Corp. v. GDL Best Contractors, Inc. (2019) 38 Cal.App.5th 677, 695.) To the extent that the FAC is uncertain, discovery can resolve the issues.

Standing to Sue: Code Civ. Proc., § 367 provides that “Every action must be prosecuted in the name of the real party in interest, except as otherwise provided by statute.” “The real party in interest has ‘an actual and substantial interest in the subject matter of the action,’ and stands to be ‘benefited or injured’ by a judgment in the action.’” (Turner v. Seterus, Inc. (2018) 27 Cal.App.5th 516, 525.) Plaintiff is the real party in interest. This is not a derivative action.

Statute of Limitations: “‘A demurrer on the ground of the bar of the statute of limitations will not lie where the action may be, but is not necessarily barred.’ [Citations.] It must appear clearly and affirmatively that, upon the face of the complaint, the right of action is necessarily barred. [Citations.] This will not be the case unless the complaint alleges every fact which the defendant would be required to prove if he were to plead the bar of the applicable statute of limitation as an affirmative defense. [Citation.]” (Leasequip, Inc. v. Dapeer (2002) 103 Cal.App.4th 394, 400.)

Plaintiff did not allege when it had notice of the Arbitration Award. Since the statute of limitations is uncertain, it cannot bar the various causes of action.

First Cause of Action for Fraudulent Misrepresentation and Concealment

There are two separate cause of action combined together. The better practice would be to state these causes of action separately.

The first cause of action is for intentional misrepresentation. “The essential elements of a count for intentional misrepresentation are (1) a misrepresentation, (2) knowledge of falsity, (3) intent to induce reliance, (4) actual and justifiable reliance, and (5) resulting damage.” (Chapman v. Skype Inc. (2013) 220 Cal.App.4^th 217, 230-231.)

The second cause of action is for fraudulent concealment. “The elements of a cause of action for fraudulent concealment are: (1) concealment of a material fact; (2) by a defendant with a duty to disclose; (3) the defendant intended to defraud by failing to disclose; (4) plaintiff was unaware of the fact and would not have acted as it did had it known the fact; and (5) damages.” (Butler America, LLC v. Aviation Assurance Company, LLC (2020) 55 Cal.App.5th 136, 144.)

“’In California, fraud must be pled specifically; general and conclusory allegations do not suffice. . . . This particularity requirement necessitates pleading facts which 'show how, when, where, to whom, and by what means the representations were tendered.'” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.)

Plaintiff alleged that “Defendants and each of them made representations to Plaintiff that certain important facts were true, when they were not.” (FAC, ¶ 75.) Plaintiff failed to identify specific facts that were misrepresented. Similarly, for concealment, Plaintiff alleged “Defendants and each of them concealed and suppressed material facts.” (FAC, ¶ 83.) The particular facts are not identified.

Second Cause of Action for Fraudulent Inducement

“To establish a claim of fraudulent inducement, one must show that the defendant did not intend to honor its contractual promises when they were made. . . [A]lthough that fraudulent intent is often established by circumstantial evidence, ‘something more than nonperformance is required to prove the defendant's intent not to perform his promise.’” (Food Safety Net Services v. Eco Safe Systems USA, Inc. (2012) 209 Cal.App.4th 1118, 1131–1132.)

The FAC alleged that “Plaintiff is informed and believes and on that basis alleges that Defendants Vigouroux, Guerry and Vasquez were knowing participants in these wrongful acts and failures to act, and are therefore jointly and severally liable therefor.” (¶ 88.) This allegation failed to allege specific facts to demonstrate fraudulent inducement.

Fourth Cause of Action for Accounting

“A cause of action for an accounting requires a showing that a relationship exists between the plaintiff and defendant that requires an accounting, and that some balance is due the plaintiff that can only be ascertained by an accounting.” (Jolley v. Chase Home Finance, LLC (2013) 213 Cal.App.4th 872, 910.)

Plaintiff properly alleged the cause of action for accounting. Plaintiff alleged that “Defendants had a contractual as well as a fiduciary duty relationship with Plaintiff.” (FAC, ¶ 101.) Furthermore, Plaintiff alleged that “a balance is due from Defendants.” (FAC, ¶ 101.)

Fifth Cause of Action for Conversion

The elements of a conversion claim are: (1) the plaintiff's ownership or right to possession of the property; (2) the defendant's conversion by a wrongful act or disposition of property rights; and (3) damages. (Mendoza v. Rast Produce Co., Inc. (2006) 140 Cal. App. 4th 1395, 1404-05.)

Legal services do not seem capable of being subject to conversion because they are not personal property or intangible property that gives control to tangible property. (Welco Electronics, Inc. v. Mora (2014) 223 Cal.App.4th 202, 210 (holding that there can be a conversion of intangible rights represented by special instruments such as a check bank book, insurance policy, or stock certificate).

Paragraph 116 of the FAC alleges that “The loss of stock ownership in Pinscriptive with zero monetary compensation meets the third element of the cause of action, i.e. damages.” “Money cannot be the subject of a cause of action for conversion unless there is a specific, identifiable sum involved, such as where an agent accepts a sum of money to be paid to another and fails to make the payment.” (PCO, Inc. v. Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro (2007) 150 Cal.App.4th 384, 395.) Zero monetary compensation due to stock loss is not conversion.

Defendant to give notice.