Judge: Elaine W. Mandel, Case: 22SMCV00951, Date: 2023-04-28 Tentative Ruling
Case Number: 22SMCV00951 Hearing Date: April 28, 2023 Dept: P
Tentative
Ruling
United
Brands Worldwide, LLC v. D&K Worldwide, LLC, et al., Case No. 22SMCV00951
Hearing
date April 28, 2023
Defendant
D&K Worldwide’s Demurrer to First Amended Complaint
Plaintiff consulting firm United Brands agreed to
provide defendant D&K with advice and assistance related to the purchase, lease
and sale of real estate in exchange for 20% of profits from the investment.
United located a piece of property and negotiated its purchase on D&K’s
behalf; United alleges D&K failed to pay the 20%.
On January
17, 2023 the court sustained a demurrer with leave to amend. D&K demurs to
causes of action for breach of the covenant of good faith and fair dealing,
conversion and accounting in the FAC.
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.
The FAC alleges
United Brands “breached the implied promise of good faith and fair dealing by
unfairly interfering with plaintiff’s right to receive the benefits under the
agreement, as set out above and incorporated here as though fully set out in
preceding paragraphs.” FAC ¶40. The “preceding paragraphs” contain several
factual allegations. It is unclear which forms the basis of the implied
covenant cause of action. The claim is uncertain. Further, the allegations do
not go beyond those of a mere contract breach, making them superfluous. SUSTAINED
without leave to amend.
Conversion
A mere
contractual right to payment, without more, is not sufficient to support a
cause of action for conversion. Farmers Ins. Exchange v. Zerin (1997) 53
Cal.App.4th 445, 451-452.
The
conversion claim is based on the alleged failure to pay the agreed-upon percentage
of profits and increased market value. These are simply contractual rights to
payment United Brands allegedly failed to pay. Per Farmers, failure to
pay under a contract, without more, is not a sufficient basis for a conversion
cause of action. SUSTAINED without leave to amend.
Accounting
The right to
an accounting arises when there is a special relationship between the parties
that requires an accounting, and an unknown balance is due that cannot be
ascertained without an accounting. E.g., Kritzer v. Lancaster (1950) 96
Cal.App.2d 1, 7.
United
Brands allege D&K has not adequately alleged how calculating rental profits
requires an accounting. The FAC alleges the calculation require “numerous
factors, including but not limited to multiple tenants, periods of vacancies,
or non-payment of rent by tenants due to COVID-19, the cost of upkeep,
maintenance, and any upgrades.” FAC ¶66. This is sufficient for pleading
purposes. OVERRULED.