Superior Court of California 

County of Los Angeles – West District  

Beverly Hills Courthouse / Department 205 

 

 

BACKGROUND 

This is a fraud and financial elder abuse case.  Plaintiffs Patrick Bertranou and Walker Land LLC allege that Defendant Kenneth Kai Chang approached Bertranou about a real estate development project Chang had underway in Honolulu, Hawaii.  (Compl. ¶¶ 16-17.)  The project was for a 328-unit condominium building called the Ililani. (Id. ¶ 17.)  

Chang allegedly asked Bertranou to loan him and his company, Defendant Hui O Ka La, $3.5 million plus 10% annual interest for no more than two years.  (Id.)  As an incentive to Bertranou, Chang allegedly suggested the loan be structured as two written option agreements, which would result in Bertranou paying a capital gains rate on interest income.  (Id. ¶ 18.)   

The first option would involve the acquisition by Hillgreen Capital, LLC (“Hillgreen”), Bertranou’s personal company, and FMG, LLP (“FMG”), the personal company of Bertranou’s partner, Michael Lehrer, of an option from Defendant Beresford Properties, LLC (the “Beresford Option Agreement”).  (Id. ¶ 21.)  This option would then be assigned by Hillgreen and FMG to Walker Land, LLC (“Walker Land”), an entity created by Bertranou and Lehrer to hold their interests in the deal.  (Id.)  The second option agreement would involve Hui O Ka La and Chang acquiring the option from Walker Land (the “Walker Land Agreement”). (Id.)  

Chang allegedly drafted the written option agreements and sent them to Bertranou for his review. (Id. ¶ 25.) After reading through the written option agreements, Bertranou called Chang to let him know that the documents did not work for him because there was no express requirement that Chang exercise the Walker Land option.  (Id.)  According to Plaintiffs, Chang allegedly told Bertranou not to worry, that they had an oral agreement, and that the written option agreements were drafted “for the sole purpose of giving [Bertranou] the opportunity to pay taxes at capital gains rates.” (Id.) Nonetheless, Chang purportedly stated that he would revise “the documents to require Hui O Ka La and [Chang] to exercise the Walker option by the end of ten quarters.” (Id.)  

Plaintiffs allege that Chang sent Bertranou a new set of documents and allegedly represented that the revisions reflected the changes that they had discussed. (Id. ¶ 26.)  Plaintiffs allege that Bertranou was distracted because he was diagnosed with bladder cancer.  (Id.)  Bertranou claims he relied on Chang’s assurances about the oral agreement and signed the written option agreements without reading them.  (Id.)  Bertranou then lent $3.5 million to Chang and Hui O Ka La. (Id.)  

Plaintiffs admit that the parties performed under the written agreement when Chang began making payments pursuant to the Walker Land Agreement on April 30, 2019, with a $50,000 initial installment. (Id. ¶ 27.) Plaintiffs admit further that, in accordance with the Walker Land Agreement, Chang made four quarterly payments of $31,250. (Id.)  

The Walker Land Agreement provided that the following six quarterly payments would increase to $43,750. (Id.) Instead, Chang continued paying $31,250 for an additional two quarters. (Id.)  Plaintiffs allege that Defendants’ failure to pay the increased amount was a breach of the written Walker Land Agreement. (Id.)   

Plaintiffs allege further that Chang asked he and Hui O Ka La be given a grace period until April 2023 to repay the loan, given the COVID-19 pandemic. (Id. ¶ 28.)  Bertranou agreed.  (Id.) In April 2023, Chang allegedly requested an additional grace period until April 2024. (Id. ¶ 29.)  Bertranou again agreed. (Id.)  On March 4, 2024, Chang and Hui O Ka La made an interest payment of $31,250. (Id. ¶ 30.)  Bertranou then demanded payment in full. (Id.) Plaintiffs allege that no further payments have been made by Defendants. (Id.)  

The operative complaint alleges seven claims for (1) breach of contract, (2) open book account, (3) account stated, (4) money lent, (5) financial elder abuse, (6) fraud, and (7) negligent misrepresentation.  

This hearing is on Defendants’ demurrer.  Defendants argue that (1) Plaintiffs’ claim for breach of an oral contract is barred by the integration clauses in the written option agreements; (2) Plaintiffs’ tort claims cannot survive because they are based on a breach of contract; (3) Plaintiffs’ financial elder abuse claim fails because there are no allegations which would support a finding of an intent to defraud or undue influence; and (4) Plaintiffs’ fraud and negligent misrepresentation claims fail because there is no actionable misrepresentation as the alleged misstatements relate to future events and/or opinions; there is no intent to defraud as Defendants made payments on the loan, and there can be no justifiable reliance given Plaintiffs’ sophistication. 

MEET AND CONFER¿ 

Code Civ. Proc. §430.41 requires that “[b]efore filing a demurrer pursuant to this chapter, the demurring 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 demurring party shall file and serve a declaration detailing their meet and confer efforts. (Code Civ. Proc. § 430.41(a)(3).)¿ Defendants submit the declaration of Ashlei M. Vargas which fails to attest that the parties met and conferred by telephone or in person.  Notwithstanding, the Court cannot sustain or overrule a demurrer based on an insufficient meet and confer.  (Code Civ. Proc. § 430.41(a)(4).)¿ 

LEGAL STANDARD 

A demurrer to a complaint may be general or special.  A general demurrer challenges the legal sufficiency of the complaint on the ground it fails to state facts sufficient to constitute a cause of action. (Code Civ. Proc., § 430.10, subd. (e); Lewis v. Safeway, Inc. (2015) 235 Cal.App.4th 385, 388.)  A special demurrer challenges other defects in the complaint, including whether a pleading is uncertain. (Code Civ. Proc., § 430.10, subd. (f).)  The term uncertain includes the issue of whether the pleading is “ambiguous and unintelligible.”  (Id.)  A demurrer for uncertainty should be sustained if the complaint is drafted in such a manner that the defendant cannot reasonably respond, i.e., the defendant cannot determine what issues must be admitted or denied, or what counts are directed against the defendant. (Khoury v. Maly's of California, Inc. (1993) 14 Cal.App.4th 612, 616.) 

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.) 

ANALYSIS 

Breach of Oral Contract 

Defendants argue that Plaintiffs’ claim for breach of an oral contract is barred by the integration clauses in the option agreements.  The Court agrees.   

A written agreement with an integration clause “may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement.”  (Cal. Code Civ. Proc. §1856(a).)  “The crucial issue in determining whether there has been an integration is whether the parties intended their writing to serve as the exclusive embodiment of their agreement.”  (Grey v. American Management Services (2012) 130 Cal.App.4th 803, 807 (internal citations omitted). “The existence of an integration clause is a key factor in divining that intent.”  (Id.)   

Here, Plaintiffs describe the “oral agreement” that was breached as an agreement to lend $3.5 million in exchange for principal plus 10% simple interest.  (Compl. ¶ 33.)  But this loan is encompassed by the written option agreements which contain integration clauses superseding prior oral agreements and precluding future oral modifications.   

Section 14.1 of the Beresford Option Agreement states:  

“This Agreement contains the entire understanding of the parties hereto with respect to the subject matter hereof, and no prior or contemporaneous written or oral agreement or understanding pertaining to any such matter shall be effective for any purpose. No provision of this Agreement may be amended or added to except by an agreement in writing signed by the parties hereto.”  

 

Similarly, the Walker Land Option provides, in Section 10:  

“(j) This Agreement represents the entire agreement between the parties hereto with respect to the transactions contemplated hereby and supersedes all prior agreements with respect thereto, whether written or oral.  

 

(k) This Agreement constitutes a single, integrated written contract expressing the entire agreement of the parties hereto relative the subject matter hereof. No covenants, agreements, understandings, representations, or warranties of any kind whatsoever have been made by any party hereto. All prior discussions and negotiations have been and are merged and integrated into, and are superseded by, this Agreement. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless in writing signed by both parties.”  

 

These integration clauses bar a claim for breach of an oral contract covering the same subject matter.   

Notwithstanding these clauses, Plaintiffs argue that the parties made subsequent oral agreements or orally modified the written agreements.  But the written agreements only allow for modifications in writing signed by both parties.  Plaintiffs point to no writing, much less one signed by both parties.   

Furthermore, Civil Code § 1624 requires any oral modification to be in writing where, among other circumstances: “(l) An agreement that by its terms is not to be performed within a year from the making thereof” and “(7) A contract, promise, undertaking, or commitment to loan money or to grant or extend credit, in an amount greater than one hundred thousand dollars ($100,000), not primarily for personal, family, or household purposes, made by a person engaged in the business of lending or arranging for the lending of money or extending credit.”  Plaintiffs’ allegations in the Complaint plainly indicate that the purported oral agreement entered into by Defendants (1) could not be performed within one year, and (2) was a contract  to loan money in an amount greater than $100,000.   

Accordingly, the Court sustains the demurrer to Plaintiffs’ breach of oral contract claim.   

Tort Claims 

Defendants argue that their breach of contract, even if negligent, fraudulent or willfully malicious, cannot give rise to a tort claim.  The Court disagrees. 

Conduct amounting to a breach of contract becomes tortious only when it also violates a duty independent of the contract arising from principles of tort law.  (Applied Equipment,¿7 Cal. 4th at 515.)  “An omission to perform a contract obligation is never a tort, unless that omission is also an omission of a legal duty.”  (Id., quoting¿Jones v. Kelly¿(1929) 208 Cal. 251, 255.) 

Generally,¿outside the insurance context, “a tortious breach of contract . . . may be found when (1) the breach is accompanied by a traditional common law tort, such as fraud or conversion; (2) the means used to breach¿the contract are tortious, involving deceit or undue coercion or; (3) one party intentionally breaches the contract intending or knowing that such a breach will cause severe, unmitigable harm in the form of mental anguish, personal hardship, or substantial consequential damages.” (Freeman & Mills,¿ 11 Cal. 4th at 105.).)  Focusing on intentional conduct gives substance to the proposition that a breach of contract is tortious only when some independent duty arising from tort law is violated. (Applied Equipment,¿7 Cal. 4th at 515.)  

Here, Plaintiffs have alleged intentional wrongdoing, in the form of fraud and financial elder abuse, and accordingly, their claim is not simply one for breach of contract.   

Financial Elder Abuse 

Defendants contend Plaintiffs have failed to allege the intent or undue influence necessary to support a claim for financial elder abuse.  The Court disagrees. 

The¿elements¿of a¿financial elder abuse¿claim are: (1) defendant took hid, appropriated, obtained or retained plaintiff's property or assisted in same; (2) plaintiff was 65 years of age or older at the time of the conduct; (3) defendant did so for a wrongful use or with the intent to defraud or by undue influence; (4) plaintiff was harmed; and (5) defendant’s conduct was a substantial factor in causing plaintiff's harm.  (CACI 3100.) 

Because it is a statutory claim,¿financial elder abuse¿must be pleaded with¿particularity.  (Covenant Care, Inc. v. Superior Ct. (2004) 32 Cal.4th 771, 790;¿see also¿Carter v. Prime Healthcare Paradise Valley LLC¿(2011) 198 Cal.App.4th 396, 407, 410.) 

Here, Plaintiffs have sufficiently alleged all the elements of a claim for financial elder abuse.  First, Defendants took $3.5 million from Plaintiff.  (Compl. ¶ 57.)  Second, Plaintiff Bertranou is 67 years old.  (Id. ¶ 56.)  Third, Defendant took the money by undue influence.  Specifically, Defendants “knew of Bertranou’s advancing age, declining business acumen, declining health and vulnerability. They knew of his desire to place retirement funds into safe investments, and they took advantage of this knowledge to convince him that: they were experts in real estate development; they knew the Ililana Project was a sound one, and the Loan would be safe; Bertranou would recover the principal of his Loan plus 10% interest within two years; the Loan was a ‘sure thing;’ and it was the perfect investment opportunity for him. They pressed him to commit in a hurry, despite the onset of health issues.”  (Id. ¶ 57.)  Fourth, Plaintiff was harmed in excess of $20 million.  (Id. ¶ 61.)  And fifth, Defendant’s actions were the cause of Plaintiff’s harm.  (Id.) 

Defendants argue Plaintiffs have not shown Defendants intended to defraud Bertranou or took his money for wrongful use.  Even assuming Defendants’ argument were correct, financial elder abuse may also be shown by the taking of money by undue influence, which Plaintiffs have alleged.  The element that the defendant took plaintiff’s property “for a wrongful use or with the intent to defraud or by undue influence” is stated in the disjunctive.   

Accordingly, the Court overrules the demurrer to Plaintiffs’ financial elder abuse claim. 

Fraud Claim 

Defendants argue that Plaintiffs have failed to plead fraud with particularity, and in any event cannot show an actionable representation, intent to defraud or justifiable reliance.  The Court agrees in part. 

Fraud requires: (1) a misrepresentation; (2) knowledge of falsity or scienter; (3) intent to defraud or induce reliance; (4) justifiable reliance; and (5) resulting damage.  (See Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.)  The facts constituting every element of the alleged fraud must be alleged with particularity.  (Goldrich v. Natural Y Specialities, Inc. (1994) 25 Cal.App.4th 772, 782.)  Plaintiffs must plead specific facts which “show how, when, where, to whom, and by what means the representations were tendered.” (Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73.) 

Here, Plaintiffs have plead fraud with the requisite particularity.  They allege Chang made the following specific misrepresentations “in or about the spring of 2019” in “phone calls and face to face meetings”: (1) Chang was an expert in real estate development; (2) the Loan would be a safe investment; (3) Chang had a net worth in excess of $14 million; (4) repayment of the principal plus interest within two years would be a “sure thing;” (5) the parties would set up some documentation that would enable Bertranou, should he so desire, to claim on his taxes that the interest payments on the Loan were actually capital gains, and this documentation would otherwise be of no consequence to the deal; (6) the deal documentation would be amended to require that Chang and Hui LLC exercise the Walker Option and acquire the Beresford Option by no later than the end of the tenth quarter; and (7) the revised documents sent by Chang to Bertranou were amended as represented.  (Compl. ¶¶ 65-66.)  Thus, Plaintiffs have alleged the who, what, when, where and to whom of fraud.   

Defendants argue that these representations are not actionable because they relate to future events.  The Court agrees that representations that the investment was “safe” or a “sure thing” are forecasts of future business prospects which are not actionable.  (Gentry v. eBay, Inc. (2002) 99 Cal.App.4th 816, 835 (actionable misrepresentations must pertain to past or existing material facts; Neu-Visions Sports, Inc. v. Soren/McAdam/ Bartells¿(2000) 86 Cal.App.4th 303, 309–310 (statements or predictions regarding future events are deemed to be mere opinions which are not actionable); Cansino v. Bank of America (2014) 224 Cal.App.4th 1462, 1469-1470 (forecasts about the real estate market cannot constitute actionable fraud).)   

But Plaintiffs’ fraud claim also relies on other misstatements that are about past events, including that the revised documents sent by Chang to Bertranou were amended as represented.  Accordingly, while some of Plaintiffs’ allegations may not support a fraud claim, others do, and a demurrer cannot be sustained to only part of a claim.  (Kong, 108 Cal. App. 4th at 1047 (“a demurrer cannot¿rightfully be¿sustained¿to¿part¿of a cause of action .. ."); accord¿Greese v. Sup. Ct. (1984) 157 Cal.App.3d 159, 163.)¿   

 Defendants next argue that the Complaint is devoid of any facts showing an intent to defraud.  Instead, Plaintiffs rely exclusively on Defendants’ non-performance to allege an intent to defraud.  Under California law, “something more than¿nonperformance¿is required to prove the defendant’s intent not to perform his promise’ . . .¿To be sure, fraudulent intent must often be established by circumstantial evidence.  Prosser, for example, cites cases in which fraudulent intent has been inferred from such circumstances as defendant’s insolvency, his¿hasty repudiation of the promise, his¿failure even to attempt performance, or his¿continued assurances after it was clear he would not perform¿. . . . However, if [the] plaintiff adduces no further evidence of fraudulent intent than proof¿of nonperformance . . . , he will never reach a jury.” (Tenzer v. Superscope, Inc.¿(1985) 39 Cal.3d 18, 30-31.)  Here, there was no hasty repudiation nor a complete failure to perform.  To the contrary, the Complaint alleges Chang made payments from April 2019 through March 2024, negating an inference that Defendants never intended to perform on their promise.  (Compl. ¶¶ 27, 30.)     

Defendants also argue that Plaintiffs cannot allege reasonable reliance given Bertancou’s sophistication.  But even sophisticated parties may be duped.  And the Court cannot conclude as a matter of law that Bertancou’s experience in developing and managing commercial and residential real estate meant he could not reasonably rely on Chang, whom he considered to be a close personal friend and who he believed to be a successful real estate developer.  (Id. ¶2.)   

Defendants next argue that Plaintiffs have not alleged misrepresentations on the part of the corporate defendants, Beresford Properties, LLC and/or Hui O Ka La, LLC.  But Plaintiffs allege that Chang was their agent, and therefore, misrepresentations by him are attributable to the corporate defendants.  (Compl. ¶ 13.)     

In sum, while the Court concludes Plaintiffs adequately alleged a misrepresentation and reasonable reliance, they have not alleged facts to support a finding of an intent to deceive, and therefore, their fraud claim is subject to demurrer with leave to amend.   

Negligent Misrepresentation Claim 

Defendants argue that Plaintiffs cannot plead a negligent misrepresentation claim because they have not alleged actionable fraud and justifiable reliance.  The Court disagrees for reasons stated above.  Accordingly, the Court overrules the demurrer to Plaintiffs’ negligent misrepresentation claim.   

CONCLUSION 

For the foregoing reasons, the Court SUSTAINS IN PART and OVERRULES IN PART Defendant’s demurrer without leave to amend as to the breach of oral contract claim and with 20 days’ leave to amend as to the fraud claim. 

 

IT IS SO ORDERED. 

 

DATED: September 17, 2024 ___________________________ 

Edward B. Moreton, Jr. 

Judge of the Superior Court