Judge: Frank M. Tavelman, Case: 23BBCV02243, Date: 2024-12-06 Tentative Ruling

Case Number: 23BBCV02243    Hearing Date: December 6, 2024    Dept: A

DEMURRER & MOTION TO STRIKE

NOTICE:

The Court is not requesting oral argument on this matter.  The Court is guided by California Rules of Court, Rule 3.1308(a)(1) whereby notice of intent to appear is requested.  Unless the Court directs argument in the Tentative Ruling, no argument is requested and any party seeking argument should notify all other parties and the court by 4:00 p.m. on the court day before the hearing of the party’s intention to appear and argue.  The tentative ruling will become the ruling of the court if no argument is received.  

Notice may be given either by email at BurDeptA@LACourt.org or by telephone at (818) 260-8412.

ALLEGATIONS: 

Simon Moshe (Plaintiff) brings this action against CP Custom Woodworks, Inc. (Defendant). Plaintiff alleges that Defendant breached an oral agreement between the two concerning a joint business venture. Plaintiff’s Second Amended Complaint (SAC) states causes of action for (1) Breach of Contract, (2) Tortious Interference with Economic Relationship, and (3) Accounting.

Defendant now demurs to the first two causes of action on grounds that Plaintiff has failed to allege sufficient facts. Defendant also moves to strike various portions of the SAC as irrelevant and also moves to strike Plaintiff’s request for punitive damages. Plaintiff opposes the demurrer and motion to strike and Defendant replies.

ANALYSIS: 

I.                    LEGAL STANDARD 

Demurrer

The grounds for a demurrer must appear on the face of the pleading or from judicially noticeable matters. (C.C.P. § 430.30(a); Blank v. Kirwan (1985) 39 Cal. 3d 311, 318.) A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.) The only issue involved in a demurrer hearing is whether the complaint states a cause of action. (Id.)

A demurrer assumes the truth of all factual, material allegations properly pled in the challenged pleading. (Blank v. Kirwan, supra, 39 Cal. 3d at p. 318.) No matter how unlikely or improbable, the plaintiff’s allegations must be accepted as true for the purpose of ruling on the demurrer. (Del E. Webb Corp. v. Structural Materials Co. (1981) 123 Cal.  App. 3d 593, 604.) But this does not include contentions; deductions; conclusions of fact or law alleged in the complaint; facts impossible in law; or allegations contrary to facts of which a court may take judicial notice.  (Blank, supra, 39 Cal. 3d at 318.)

Pursuant to C.C.P. §§ 430.10(e) and (f), the party against whom a complaint has been filed may demur to the pleading on the grounds that the pleading does not state facts sufficient to constitute a cause of action, or that the pleading is uncertain, ambiguous and/or unintelligible. It is an abuse of discretion to sustain a demurrer without leave to amend if there is a reasonable probability that the defect can be cured by amendment. (Schifando v. City of Los Angeles (2003) 31 Cal. 4th 1074, 1082.)

Motion to Strike

Motions to strike are used to reach defects or objections to pleadings that are not challengeable by demurrer, such as words, phrases, and prayers for damages. (See C.C.P. §§ 435, 436, and 437.)

The grounds for a motion to strike are governed by C.C.P. § 436. This code section provides the Court with discretion to strike out material from a pleading (1) where it appears that the matter is “irrelevant, false, or improper” or (2) where the pleading is not “drawn or filed in conformity with the laws of this state, a court rule, or an order of the court.” (C.C.P. § 436(a)-(b).) The grounds for a motion to strike shall appear on the face of the challenged pleading or from any matter of which the court is required to take judicial notice. (C.C.P. § 437.)

II.                 MERITS

Meet and Confer

C.C.P. §§ 430.41(a) and 435.5(a) requires that the moving party meet and confer with the party who filed the pleading that is subject to the demurrer and/or motion to strike. The Court notes that no meet and confer declaration was filed in connection with this demurrer. Regardless, failure to meet and confer is not grounds to overrule or sustain a demurrer, or grant or deny a motion to strike. (C.C.P. §§ 430.41(a)(4); C.C.P. 435.5(a)(4).)

First COA - Breach of Contract – Sustained with 20 days’ Leave to Amend

To state a cause of action for breach of contract, Plaintiff must be able to establish “(1) the existence of the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to the plaintiff.” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.) An oral contract may be pled generally as to its effect because it is rarely possible to allege the exact wording. (Khoury v. Maly's of Calif. (1993) 14 Cal.app.4th 612, 616.)

The main thrust of Defendant’s demurrer is that Plaintiff has failed to allege the substantive terms of their oral contract. Defendant provides a laundry list of sample contract terms which are not alleged in the SAC (i.e. Termination Clauses, Payment Periods, etc.). Defendant argues these omissions are fatal because Plaintiff is required to plead “the substance of its relevant terms.” (Dmr. p. 7, citing to Heritage Pacific Financial, LLC v. Monroy (2013) 215 Cal.App.4th 972, 993.) The Court finds this argument unpersuasive and improperly conflates the standards of pleading for oral contract with those of written contracts. The only legal authority Defendant offers in support of his argument is the aforementioned Heritage Pacific, which is inapposite. 

Heritage Pacific concerned a cause of action for fraud by a home loan assignee, Heritage, as against the borrower. (Id. at 983.) The trial court sustained a demurrer by the lender, on grounds that Heritage had not sufficiently pled facts establishing that the assignee intended to transfer the ancillary right to a tort claim. (Id. at 992.) The trial also ordered that Heritage must attach the written assignment agreement to its pleadings. (Id.) On appeal, Heritage argued that the trial court’s requirement that Heritage produce the assignment agreement was an improper weighing of the evidence. (Id. at 993.) Despite the fact that a written assignment agreement existed, Heritage argued that it only needed to plead the ultimate facts of the assignment to proceed with its fraud cause of action. The Court of Appeal confirmed the trial court’s ruling, stating that Heritage had neither attached the agreement nor pled “the substance of its relevant terms” such that the fraud action was pleaded with the requisite specificity. (Id. citing McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1489)

Defendant’s reliance on Heritage Pacific is misplaced. Defendant’s quotation to Heritage Pacific omits crucial context and thereby misrepresents its holding. The entire quote in Heritage Pacific is as follows:

“A written contract may be pleaded either by its terms—set out verbatim in the complaint or a copy of the contract attached to the complaint and incorporated therein by reference—or by its legal effect. [Citation.] In order to plead a contract by its legal effect, plaintiff must ‘allege the substance of its relevant terms. This is more difficult, for it requires a careful analysis of the instrument, comprehensiveness in statement, and avoidance of legal conclusions.’ [Citation.]”

(Id. [emphasis added].)

Viewing the entire quotation in context makes clear that the “substance of relevant terms” requirement is only discussed in the context of a written agreement. The court in Heritage Pacific provided this quotation to clarify that where a written agreement exists outlining specific terms, the complaining party must either attach the agreement or specifically plead its terms. Here, there is no written agreement and no reason to apply the stricter pleading requirements suggested by Defendant.

Defendant appears to overlook or omit an entire body of cases that discuss the specificity required for an oral contract.  For example, in Khoury the Court of Appeal discussed that an oral contract may be pleaded generally as to its effect because it is rarely possible to allege the exact words. (Khoury v. Maly's of California, Inc. (1993) 14 Cal.App.4th 612, 616; see also, Scolinos v. Kolts (1995) 37 Cal.App.4th 635, 640.)  As such, the demurrer will not be granted on these grounds; however, as noted below the pleading is nonetheless deficient.

While Plaintiff may have satisfied the more general pleading requirements of an oral contract, his allegation of a “joint venture” complicates the Court’s analysis. To sufficiently plead the existence of a joint venture, Plaintiff must allege (1) a joint interest in a common business; (2) with an understanding to share profits and losses; and (3) a right to joint control. (Jacobs v. Locatelli (2017) 8 Cal.App.5th 317.)

Here, Plaintiff has pled no factual allegations in support of the claim that he and Defendant were in a joint venture. Plaintiff pleadings do not allege a common business, rather they indicate that Plaintiff and Defendant each maintained their own businesses. Further, Plaintiff does not plead any sharing of profits/losses, only that he is entitled to a percentage of clients he brings to Defendant. Lastly, no facts are present as to joint control because, as previously stated, it has not been alleged that Plaintiff and Defendant managed a common business. 

In short, Plaintiff has pled sufficient facts as to the existence of an oral contract but has not pled generally pled its effect of creating a joint venture. Accordingly, the demurrer to the first cause of action is SUSTAINED with 20 days’ leave to amend.

Second Cause of Action – Intentional Interference with Prospective Economic Advantage – Sustained with 20 days’ Leave to Amend

The elements of a claim for intentional interference with prospective economic advantage include “(1) an economic relationship between the plaintiff and some third party, with the probability of future economic benefit to the plaintiff; (2) the defendant’s knowledge of the relationship; (3) intentional or negligent acts on the part of the defendant designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm to the plaintiff proximately caused by the acts of the defendant.” (Crown Imports, LLC v. Superior Court (2014) 223 Cal.App.4th 1395, 1404 [citations, brackets, and quotation marks omitted].)

Further, “the alleged interference must have been wrongful by some measure beyond the fact of the interference itself. For an act to be sufficiently independently wrongful, it must be unlawful, that is, it is proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard.” (Id. [citation, ellipsis, and quotation marks omitted].)

Defendant demurs to this cause of action arguing that Plaintiff has not alleged any independent wrongful conduct. Defendant states the only wrongful conduct alleged in Plaintiff’s SAC is the breach of contract itself. The Court finds this argument persuasive. The California Supreme Court has repeatedly held that breach of a contract, without more, cannot serve as “wrongful conduct” in support of a tort claim. (Drink Tank Ventures LLC v. Real Soda in Real Bottles, Ltd. (2021) 71 Cal.App.5th 528, 532 [citations omitted].) Here, Plaintiff’s SAC is bereft of any allegations of Defendant’s wrongful conduct outside of the alleged breach of oral contract.

Plaintiff’s opposition sidesteps this argument completely. Plaintiff presents no authority that the breach of contract legally constitutes an independent wrong, nor does he argue that the SAC currently alleges a wrong outside of breach. Instead, Plaintiff states:

Even if a breach of contract does not constitute an independent wrong giving rise to a claim for intentional interference with economic relationship, plaintiff can allege an independent wrong – namely breach of fiduciary duties.

(Opp. p. 7.)

First, Plaintiff’s “even if” statement is entirely unsupported by authority or argument to the contrary. Plaintiff’s bare contention that breaches of contract can serve as an independent wrongful act has been shown to be an incorrect understanding of the law. Second, Plaintiff’s statement that he may be able to allege breach of fiduciary duty does not speak to the sufficiency of the SAC and thus has no bearing on this demurrer.

Seemingly acceding that something further must be alleged, Plaintiff’s opposition requests the Court grant leave to amend so that Plaintiff may state a claim for Breach of Fiduciary Duty. Plaintiff reasons that a breach of fiduciary duty may serve as independent wrongful conduct under Tri-Growth Centre City, Ltd. v. Silldorf, Burdman, Duignan & Eisenberg (1989) 216 Cal.App.3d 1139. The Court finds this argument misunderstands the holding in Tri-Growth.

In Tri-Growth, a real estate development group brought suit against one of its investors. (Tri-Growth supra, 216 Cal.App.3d at 1145-1148.) The investor, an attorney, has previously provided legal services to other members of the development group. (Id.) The development group alleged that the attorney had used confidential information obtained as a member of the group to encourage the law firm in which he was partner to undercut the development group’s bid for a plot of land. (Id.) The Court of Appeal affirmed that the attorney could be found to have breached his fiduciary duty as both a limited partner of the development group and legal counsel to individual members of the group. (Id. at 1151-1153.)

From the Court’s reading of Tri-Growth, it does not appear the considerations of fiduciary breach and interference with prospective advantage are directly related. The section of the opinion which discusses the cause of action for interference with prospective economic advantage contains no mention of fiduciary duty. The Tri-Growth court instead concluded that, “plaintiffs presented facts asserting defendants acquired and used the confidential information from Tri–Growth which allowed the law firm to offer an earlier closing date and ensure its offer rather than Tri–Growth's was accepted.” (Id. at 1154.) This appears to be the Tri-Growth court finding the plaintiff had alleged independently wrongful conduct by virtue of misappropriating information he obtained as a fiduciary. While the Tri-Growth defendant’s alleged conduct may have derived from his position as a fiduciary, the holding of Tri-Growth is not that any breach of fiduciary duty constitutes independent wrongful conduct.

In short, Plaintiff is required to allege facts speaking to Defendant’s independent wrongful conduct. It is not enough that Plaintiff allege Defendant’s breach of contract or breach of fiduciary duty. Accordingly, the demurrer to the second cause of action is SUSTAINED with 20 days’ leave to amend.

Motion to Strike and Statute of Frauds Addendum

As the Court has sustained the demurrer to both cause of action with leave to amend, Defendant’s motion to strike is MOOT.

Lastly, the Court addresses Defendant’s argument regarding the statute of frauds should it arise on subsequent demurrer. Defendant argues that their demurrer to the first cause of action should be sustained on grounds that the oral contract is invalidated by the statute of frauds. Defendant contends this claim is barred by the statute of frauds because the agreement alleged “involves continuous revenue sharing extending indefinitely and lacks a termination clause.” (Dmr. at p. 7.) The Court finds this argument unpersuasive.

Civil Code § 1624(a)(1) applies to an agreement "that by its terms is not to be performed within a year from the making thereof." This provision is interpreted "literally and narrowly" to mean an oral contract "where by its very terms it cannot be performed within a year from the date it is made." (Plumlee v. Poag (1984) 150 Cal.App.3d 541, 548.) In other words, "[o]nly those contracts which expressly preclude performance within one year are unenforceable." (Id.)

Here, there is nothing alleged about the terms of the oral contract that preclude performance within one year. The fact that the contract ultimately spanned more than one year does not mean it cannot be performed within a year from the date it is made. Further, Plaintiff has also alleged full performance of his services, which "creates an estoppel" to the defense of statute of frauds. (Secrest v. Security National Mortgage Loan Trust 2002-2 (2008) 167 Cal.App.4th 544, 556.)

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RULING:

In the event the parties submit on this tentative ruling, or a party requests a signed order or the court in its discretion elects to sign a formal order, the following form will be either electronically signed or signed in hard copy and entered into the court’s records. 

ORDER 

CP Custom Woodworks, Inc.’s Demurrer and Motion to Strike came on regularly for hearing on December 6, 2024, with appearances/submissions as noted in the minute order for said hearing, and the court, being fully advised in the premises, did then and there rule as follows: 

THE DEMURRER TO THE FIRST AND SECOND CAUSES OF ACTION IS SUSTAINED WITH 20 DAYS’ LEAVE TO AMEND.

THE MOTION TO STRIKE IS MOOT.

DEFENDANT TO GIVE NOTICE.

IT IS SO ORDERED.