Superior Court of California 

County of Los Angeles – West District  

Beverly Hills Courthouse / Department 205 

 

 

BACKGROUND 

This dispute arises out of the construction of an approximately 18,000 square foot home in Pacific Palisades, California, located at 15954 Alcima Avenue (the “Property”).  Defendant 15951 Alcima LLC (“Alcima”) is the owner of the Property.  Defendant Suarez Build Construction Inc.  (“Suarez”) served as a general contractor to Alcima.   

Suarez requested construction services from KE General Building Inc. (“KE”).  Alcima allegedly agreed to the requests for construction services by accepting and directly benefiting from the construction services provided by KE and further by Alcima directly paying KE for said services.   

KE assigned its claims to Plaintiff SoCal Lien Solutions LLC (“SoCal”).  SoCal claims that despite KE having performed the construction services requested by Suarez, Suarez and Alcima have failed and refused to pay the remaining balance due of $49,537.43.   

Alcima filed a cross-complaint against Suarez, KE and their sureties.  Alcima then amended the Complaint to substitute Cross-Defendants Kim Gordon and Kim Gordon, Inc. for Roe-defendants.  Alcima alleges a single claim for fraud in the inducement against Kim Gordon and Kim Gordon, Inc.  

Alcima alleges on information and belief that Gordon “made false representations to [Alcima] in or around April 2021, in order to induce [Alcima] to enter into a construction contract with Kim Gordon, Inc.  (Cross-Compl. ¶ 2.)  Alcima further alleges that Gordon made misrepresentations “in the form or oral and written communications intended to represent to [Alcima] that Kim Gordon, Inc. was a ‘design builder’ with adequate skill, knowledge and experience to take on the residential construction project on [Alcima’s] real property located at 15951 Alcima Ave, Pacific Palisades, CA 90072 (the “PROPERTY”).”  (Id. ¶ 3.) Alcima then alleges that it “relied on these misrepresentations when it engaged Kim Gordon, Inc. to perform work on the PROPERTY, and when making payments to cross-defendants.” (Id. ¶ 5.)  Alcima also alleges that “the work performed … by Kim Gordon, Inc. is grossly below the minimum standard of care for building contractors in California, and the amounts invoiced and collected by [Gordon], far exceed the value of any contributions they made to the PROPERTY.” (Id. ¶ 6.) Finally, Alcima alleges it suffered damages “in the sum of at least $5.2 million” and that it is entitled to punitive damages and attorneys’ fees. (Id. ¶ 7, Prayer.)   

This hearing is on Cross-Defendants Kim Gordon, Inc. and Kim Gordon’s demurrer to the Cross-Complaint.  Cross-Defendants argue that (1) Alcima has not plead fraud with particularity; (2) Alcima’s allegations about Cross-Defendants contradict judicial admissions that it hired other defendants to perform construction work on the property; and (3) Alcima’s fraud claim is barred by the economic loss rule.  

MEET AND CONFER 

Code Civ. Proc. § 430.41 requires that before the filing of a demurrer the moving party “shall meet and confer in person or by telephone” with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer.  (Code Civ. Proc. § 430.41(a).)  The parties are to meet and confer at least five days before the date the responsive pleading is due. (Code Civ. Proc. § 430.41(a)(2).)  Thereafter, the moving party shall file and serve a declaration detailing their meet and confer efforts. (Code Civ. Proc. § 430.41(a)(3).)  Cross-Defendants submit the Declaration of Suzanne Henry, which shows the parties met and conferred by telephone on August 28, 2024.  This satisfies the meet and confer requirements of §430.41.    

LEGAL STANDARD 

“[A] demurrer tests the legal sufficiency of the allegations in a complaint.” (Lewis v. Safeway, Inc. (2015) 235 Cal.App.4th 385, 388.)  A demurrer can be used only to challenge defects that appear on the face of the pleading under attack or from matters outside the pleading that are judicially noticeable.  (See Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994 (in ruling on a demurrer, a court may not consider declarations, matters not subject to judicial notice, or documents not accepted for the truth of their contents).)  For purposes of ruling on a demurrer, all facts pleaded in a complaint are assumed to be true, but the reviewing court does not assume the truth of conclusions of law. (Aubry v. Tri-City Hosp. Dist. (1992) 2 Cal.4th 962, 967.)  

Leave to amend must be allowed where there is a reasonable possibility of successful amendment. (See Goodman v. Kennedy (1976) 18 Cal.3d 335, 349 (court shall not “sustain a demurrer without leave to amend if there is any reasonable possibility that the defect can be cured by amendment”); Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1037 (“A demurrer should not be sustained without leave to amend if the complaint, liberally construed, can state a cause of action under any theory or if there is a reasonable possibility the defect can be cured by amendment.”).)  The burden is on the complainant to show the Court that a pleading can be amended successfully. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)  

DISCUSSION 

Cross-Defendants argue that Alcima failed to plead fraud with particularity.  The Court agrees. 

“The elements of fraud are (a) a misrepresentation (false representation, concealment, or nondisclosure); (b) scienter or knowledge of its falsity; (c) intent to induce reliance; (d) justifiable reliance; and (e) resulting damage.”¿(Lazar v.¿Sup. Ct.¿(1996) 12 Cal.4th 631, 638.) Fraud in the inducement is a subset of the tort of fraud.  It occurs when “the promisor knows what he is signing but his consent is induced by fraud, mutual assent is present and a contract is formed, which, by reason of the fraud, is voidable.”¿(Rosenthal v. Great Western Fin. Securities Corp.¿(1996) 14 Cal.4th 394, 415, quoting¿Ford v. Shearson Lehman American Express, Inc.¿(1996) 180 Cal.App.3d 1011, 1028.) 

In California, fraud must be pled specifically; general and conclusory allegations do not¿suffice.¿(Stansfield v. Starkey¿(1990) 220 Cal.App.3d 59, 74.) This¿particularity¿requirement necessitates pleading facts showing what, how, when, where, to¿whom¿and by¿what¿means the representations were tendered.¿(Id.¿at 73.) 

Here, Alcima fails to allege the specific representations that were made or to whom they were made.  Alcima simply alleges generally that Gordon made misrepresentations “in the form or oral and written communications intended to represent to [Alcima] that Kim Gordon, Inc. was a ‘design builder’ with adequate skill, knowledge and experience to take on the residential construction project on [Alcima’s] real property located at 15951 Alcima Ave, Pacific Palisades, CA 90072 (the “PROPERTY”).” (Cross Compl. ¶ 3.)  This allegation fails to specify the representations that were actually made, only the intent of the communications.  Moreover, given that Alcima is a limited liability company, it was required to identify the particular person to whom Gordon made the alleged representations or what relationship they had to Alcima.  Accordingly, Alcima’s fraud claim fails to meet the particularity requirements for pleading fraud.   

Cross-Defendants also argue that Alcima is judicially estopped from alleging they performed work on the Property because Alcima elsewhere alleged other cross-defendants performed the construction work on the Property.  The Court disagrees.  It is not inconsistent for Alcima to allege that multiple parties performed work on the Property.  That Suarez was the general contractor does not mean that Cross-Defendants could not also have performed work on the Property.   

Finally, Cross-Defendants argue that Alcima’s fraud claim is barred by the economic loss rule.  The Court disagrees. 

The economic loss rule provides that, “[i]n general, there is no recovery in tort for negligently inflicted ‘purely economic losses,’ meaning financial harm unaccompanied by physical or property¿damage.” (Sheen v. Wells Fargo Bank, N.A.¿(2022) 12 Cal.5th 905, 922.)¿    

“[T]here is no liability in tort for economic loss caused by negligence in the performance or negotiation of a contract between the parties.”  (Rest.3d Torts, Liability for Economic Harm, § 3.)  The rule functions to “bar claims in negligence for pure economic losses in deference to a¿contract between litigating parties.” (Sheen, 12 Cal.5th at 922.)  However, there are exceptions to this rule, including where the contract was fraudulently induced.  (Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 989–990.)  Here, should Alcima successfully amend its complaint to allege a fraudulent inducement claim, that claim would not be barred by the economic loss rule. 

In sum, the Court sustains the demurrer because Alcima has not sufficiently plead fraud with particularity, although the Court rejects the other two arguments raised by Cross-Defendants for their demurrer which had the Court accepted would have required sustaining the demurrer without leave to amend.     

 

CONCLUSION 

Based on the foregoing, the Court SUSTAINS the demurrer with 20 days’ leave to amend. 

     

DATED:  September 16, 2024 ___________________________ 

Edward B. Moreton, Jr. 

Judge of the Superior Court