Judge Elaine W. Mandel, Case Number: 23SMCV05866, Date: 2024-06-18 Tentative Ruling

Judge: Elaine W. Mandel, Case: 23SMCV05866, Date: 2024-06-18 Tentative Ruling

Case Number: 23SMCV05866 Hearing Date: June 18, 2024 Dept: P

Tentative Ruling

Tierney v. Westridge Investment LLC, et al., Case No. 23SMCV05866

Hearing date June 18, 2024

Defendant Sotheby’s International Realty, Inc.’s (1) Demurrer and (2) Motion to Strike

In this construction defect case, plaintiff sued broker Sotheby’s International Realty and various construction-related entities. Sotheby’s demurs to the still-pending causes of action for fraud and unfair business practices/Bus. & Prof. §17200. Causes of action 2-4 were previously dismissed as against moving defendant. Sotheby’s also moves to strike the punitive damages and attorney fees allegations.

Demurrer

In reviewing the legal sufficiency of a complaint against a demurrer, a court will treat the demurrer as admitting all material facts properly pleaded. Blank v. Kirwan (1985) 39 Cal.3d 311, 318 (Blank); C & H Foods Co. v. Hartford Ins. Co. (1984) 163 Cal.App.3d 1055, 1062. A “demurrer lies only for defects appearing on the face of the complaint[.]” Stevens v. Superior Court (1999) 75 Cal.App.4th 594, 601. For purposes of ruling on a demurrer, the complaint must be construed liberally by drawing reasonable inferences from the facts pleaded. Wilner v. Sunset Life Ins. Co. (2000) 78 Cal.App.4th 952, 958.

Plaintiff need only allege ultimate facts, not evidentiary facts. Doe v. City of Los Angeles (2007) 42 Cal.4th 531, 550. “All that is required of a plaintiff, as a matter of pleading … is that his complaint set forth the essential facts of the case with reasonable precision and with sufficient particularity to acquaint the defendant with the nature, source and extent of his cause of action.” Rannard v. Lockheed Aircraft Corp. (1945) 26 Cal.2d 149, 156 157.

Fraud Cause of Action

The statute of limitations for fraudulent concealment is three years. Code Civ. Proc. §338(d). In a cause of action for fraud, the statute of limitations begins to run “‘after one has knowledge of facts sufficient to make a reasonably prudent person suspicious of fraud, thus putting him on inquiry . . . .’ [Citation.]” Cleveland v. Internet Specialties West, Inc. (2009) 171 Cal.App.4th 24, 31. “[P]laintiffs are required to conduct a reasonable investigation after becoming aware of an injury, and are charged with knowledge of the information that would have been revealed by such an investigation.” Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 808.

“In order to rely on the discovery rule for delayed accrual of a cause of action, ‘[a] plaintiff whose complaint shows on its face that his claim would be barred without the benefit of the discovery rule must specifically plead facts to show (1) the time and manner of discovery and (2) the inability to have made earlier discovery despite reasonable diligence.’ [Citations omitted.] In assessing the sufficiency of the allegations of delayed discovery, the court places the burden on the plaintiff to ‘show diligence’; ‘conclusory allegations will not withstand demurrer.’ [Citation omitted.]” Id.

There is a three-year statute of limitations for fraud. Defendant Sotheby’s argues the claim accrued September 3, 2020, when escrow closed. The suit was filed December 15, 2023, three months after the three-year statute expired.

Plaintiff’s opposition does not address the statute of limitations argument or when the material defects were discovered. In the complaint, plaintiff alleges “[a]fter Plaintiff took possession of the PROPERTY, Plaintiff began to discover that there were substantial and material defects in the PROPERTY that had not been disclosed to Plaintiff by any of the SELLER DEFENDANTS or BROKER DEFENDANTS.” Compl. ¶52. “In order to evaluate the full extent of the construction defects at the PROPERTY, Plaintiff hired an expert to evaluate and estimate the cost of repairing the construction defects . . . .” Compl. ¶55.

These allegations are insufficient to state when and how plaintiff discovered the material defects, so the court cannot evaluate the delayed discovery claims. Setting that issue aside, the claims for fraud at paras. 20-58, see e.g. Transfer Disclosure Statement, Questionnaire and AVID forms, adequate plead a cause of action for fraud. See also paras. 110-125, and allegations of inter-related nature of defendants. SUSTAINED WITH LEAVE TO AMEND as to the delayed discovery issue.

Unfair Business Practices - Business & Professions Code §17200

California’s unfair competition law (UCL) prohibits any unlawful, unfair, or fraudulent business act or practice. Cal. Bus. & Prof. Code §17200 et seq. A claim may be brought under the UCL by a person who has suffered injury in fact and has lost money or property as a result of unfair competition. Cal. Bus. & Prof. Code §17204. To establish standing under the UCL, a plaintiff must (1) establish a loss or deprivation of money sufficient to qualify as injury in fact, i.e., economic injury, and (2) show that the economic injury was the result of, i.e., caused by, the unfair business practice that is the gravamen of the claim. See Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 337.

Defendant argues the complaint fails to state facts sufficient to constitute this cause of action because the complaint alleges unjust enrichment and there is no such cause of action in the complaint. In the sixth cause of action, plaintiff alleges “Defendants have been unjustly enriched at the expense of Plaintiff, and Plaintiff is entitled to damages and restitution in an amount to be proven at trial.” Compl. ¶130.

Plaintiff sought restitution, which is permitted in a 17200 claim. OVERRULED.

Motion to Strike

Punitive Damages

To support a prayer for punitive damages, the complaint must allege “oppression, fraud, or malice.” Cyrus v. Haveson (1976) 65 Cal.App.3d 306, 316-17. “Malice means conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.” Civ. Code §3294.

This is moot, as the demurrer to the fraud claim is sustained to allow plaintiff to allege facts supporting delayed discovery. However, the court notes plaintiff alleges intentional misrepresentation or concealment of defects to induce plaintiff into closing escrow. Compl. ¶¶112, 114, 115-118, 121-124, which would be sufficiently specific allegations of fraud to support an allegation of punitive damages. MOOT.

Attorney’s Fees

Defendant moves to strike the prayer for attorney’s fees. There are no allegations providing statutory or contractual grounds supporting attorney’s fees. GRANTED.