Judge Elaine W. Mandel, Case 22SMCV00951 2023-01-17 Tentative Ruling

Judge: Elaine W. Mandel, Case: 22SMCV00951, Date: 2023-01-17 Tentative Ruling

Case Number: 22SMCV00951 Hearing Date: January 17, 2023 Dept: P

Tentative Ruling

United Brands Worldwide, LLC v. D&K Worldwide, LLC, et al., Case No. 22SMCV00951

Hearing date January 17, 2023

Defendant D&K Worldwide’s Demurrer to Complaint and Motion to Strike

Plaintiff United Brands, a consulting firm, agreed to provide defendant D&K with advice and assistance related to the purchase, development and sale of real estate in exchange for 20% of net investment profits. United located a property and negotiated its purchase on D&K’s behalf; United alleges D&K failed to pay the contractual fee. Defendants demur and move to strike.

At the time the demurrer was heard, the motion was unopposed. The court issued a tentative ruling granting the motion in part and denying it in part. The court declined to issue a final ruling and continued the hearing to allow plaintiff to file an opposition.

The court will only address the portions of the demurrer sustained in the initial tentative ruling. The demurrers to the alter ego allegations and the breach of contract cause of action remain overruled per the prior tentative; the motion to strike is denied.

Second Cause of Action (Breach of Covenant of Good Faith and Fair Dealing)

“Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement.” Hicks v. E.T. Legg & Assoc. (2001) 89 Cal.App.4th 496, 508. “[T]he scope of conduct prohibited by the covenant of good faith is circumscribed by the purposes and express terms of the contract.” Id. at 509. “The covenant of good faith and fair dealing . . . exists . . . to prevent one contracting party from unfairly frustrating the other party’s right to receive the benefits of the agreement actually made.” Guz v. Bechtel National Inc. (2000) 24 Cal.4th 317, 349. “If the allegations for [breach of covenant of good faith and fair dealing] do not go beyond the statement of a mere contract breach and....simply seek the same damages or other relief already claimed in a companion contract cause of action, they may be disregarded as superfluous as no additional claim is actually stated.” Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1394.

Defendants claim Suleminian was not a party to the agreement and the breach of covenant claim seeks the same damages sought by the breach of contract claims.

Plaintiff argues the breach of covenant of good faith and fair dealing is based on a failure to carry out an oral modification to the underlying written agreement, and the breach of covenant cause of action is sufficiently distinct from the breach of contract claim. This distinction is not clear on the face of the complaint, which states “[d]efendant breached the implied promise of good faith and fair dealing by interfering with the plaintiff’s rights to receive the benefits of the agreement, as set out above and incorporated here as though fully set out in paragraphs 6 through 23.” Complaint ¶30. The breach of contract cause of action cites the same paragraphs; the complaint does not clarify how the two causes of action are distinct.

Under Careau, plaintiff fails to state a claim for breach of covenant of good faith and fair dealing, since the breach of covenant cause of action recites the same facts as the breach of contract claim and seeks the same damages. SUSTAINED with ten days’ leave to amend.

Third Cause of Action (Breach of Fiduciary Duty)

“The elements of a cause of action for breach of fiduciary duty are: (1) existence of a fiduciary duty; (2) breach of the fiduciary duty; and (3) damage proximately caused by the breach.”¿Gutierrez v. Girardi (2011) 194 Cal. App. 4th 925, 932.

Defendants claim they do not owe a fiduciary duty and plaintiff, the consultant/advisor, owes defendant D&K a fiduciary duty. Defendants argue a fiduciary relationship is not created by having close relations with another or because one party owed the other contractual duties. Additionally, defendants claim Suleminian did not owe a fiduciary duty, as he is not a party to the agreement, nor is it alleged he took title to the subject property. Defendants argue the written agreement contains no language that establish a confidential trust that would give rise to a fiduciary relationship. Finally, defendants claim there are no allegations that any of the parties entered into an agreement that gives rise to a confidential relationship.

A fiduciary relationship requires a relation between parties to a transaction wherein one is duty bound to act with the utmost good faith for the benefit of the other.¿Wolf v. Superior Court (2003) 107 Cal.App.4th 25, 29. A relationship ordinarily exists when “a con¿dence is reposed by one person in the integrity of another, and . . . the party in whom the con¿dence is reposed, if he voluntarily accepts or assumes to accept the con¿dence, can take no advantage from his acts relating to the interest of the other party without the latter’s knowledge or consent.” Id.

Plaintiff fails to allege facts showing a relationship that imposed a fiduciary obligation on defendants. Plaintiff alleges the relationship is a joint venture, a partnership, or an agency; in such a relationship, plaintiff, the consultant/advisor, would typically owe a fiduciary duty to defendants, the investor/client, not the reverse.

Plaintiff argues defendant’s agreement to pay 20% of net rental profits each month created a fiduciary duty. This is insufficient. A mere promise of compensation for services, without more, does not impose a fiduciary or confidential duty. SUSTAINED with ten days’ leave to amend.

Fourth Cause of Action (Fraud and Deceit); Fifth Cause of Action (Conversion)

Plaintiff’s opposition does not address the fourth cause of action for fraud or the fifth cause of action for conversion. Per the prior tentative ruling, SUSTAINED with ten days leave to amend.

Sixth Cause of Action (Accounting)

“An action for an accounting is equitable in nature.¿¿It may be brought to compel the defendant to account to the plaintiff for money or property, (1) where a fiduciary relationship exists between the parties, or (2) where, even though no fiduciary relationship exists, the accounts are so complicated that an ordinary legal action demanding a fixed sum is impracticable. [Citations].”¿ Los¿Defensores, Inc. v. Gomez¿(2014) 223 Cal.App.4th 377, 401.”To plead a request for an accounting, a complaint need only state facts showing the existence of the relationship which requires an accounting and the statement that some balance is due the plaintiff.”¿ Id.

Defendants argue plaintiff fails to state a basis under which he is entitled to an accounting. They argue an accounting is not available unless there is a fiduciary relationship that requires an accounting or there are accounts “so complicated that an ordinary legal action demanding a fixed sum is impracticable.” Jolley v. Chase Home Fin., LLC (2013) 213 Cal.App.4th 872, 910. Plaintiff failed to allege a fiduciary duty. Additionally, plaintiff argues the balance owed is uncertain and can only be determined by an accounting of net rent profits at the property from February 2015 through August 2020. Thought this argument is well-taken, it is not state in the complaint. The cause of action must be amended to clarify that it is based on the uncertainty and/or complexity of the balance owed. SUSTAINED with ten days leave to amend.