Judge Gail Killefer, Case 22STCV05761 2022-09-20 Tentative Ruling

CASE NAME: B & S Property Investment LLC, et al. v. Alliance Security Solutions

TENTATIVE: Defendant’s demurrer is sustained. Plaintiff is granted 30 days leave to amend. Defendant to give notice.

This action arises in connection with a commercial agreement (“Agreement”) to provide security services for a property located at 1601 S. Soto Street, Los Angeles, California 90023 (“Subject Property”). The Complaint alleges that in or about October 2018, B&S Property Investment, LLC (“Plaintiff”) hired Alliance Security Solutions (“Defendant”) to provide security services for the Subject Property.

Plaintiffs’ Complaint further alleges that on June 3, 2021, the Subject Property was broken into, vandalized, and burglarized, when it was purportedly under the patrol of Defendant (the “Theft”). Plaintiff alleges Defendant was not securing or guarding the Subject Property at the time of the Theft, which resulted in the Subject Property being unprotected and susceptible to theft and burglary.

Plaintiff’s operative Complaint alleges four causes of action: (1) breach of written contract; (2) breach of implied covenant of good faith and fair dealing; (3) fraud; and (4) violation of Business & Professions Code §§ 17200, et seq.

Defendant now demurrers to the second, third and fourth causes of action on the grounds that they fail to plead facts sufficient to state a cause of action. Plaintiff opposes the demurrer.

A demurrer is an objection to a pleading, the grounds for which are apparent from either the face of the complaint or a matter of which the court may take judicial notice. (Code Civ. Proc., § 430.30, subd. (a); see also Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) The purpose of a demurrer is to challenge the sufficiency of a pleading “by raising questions of law.” (Postley v. Harvey (1984) 153 Cal.App.3d 280, 286.) The court “treat[s] the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. . . .” (Berkley v. Dowds (2007) 152 Cal.App.4th 518, 525.) “In the construction of a pleading, for the purpose of determining its effect, its allegations must be liberally construed, with a view to substantial justice between the parties.” (Code Civ. Proc., § 452; see also Stevens v. Sup. Ct. (1999) 75 Cal.App.4th 594, 601.) “When a court evaluates a complaint, the plaintiff is entitled to reasonable inferences from the facts pled.” (Duval v. Board of Trustees (2001) 93 Cal.App.4th 902, 906.)

The general rule is that the 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, even as against a special demurrer, 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.) “[D]emurrers for uncertainty are disfavored and are granted only if the pleading is so incomprehensible that a defendant cannot reasonably respond.” (Mahan v. Charles W. Chan Ins. Agency, Inc. (2017) 14 Cal.App.5th 841, 848, fn. 3, citing Lickiss v. Fin. Indus. Regulatory Auth. (2012) 208 Cal.App.4th 1125, 1135.) In addition, even where a complaint is in some respects uncertain, courts strictly construe a demurrer for uncertainty “because ambiguities can be clarified under modern discovery procedures.” (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 616.)

Demurrers do not lie as to only parts of causes of action where some valid claim is alleged but “must dispose of an entire cause of action to be sustained.” (Poizner v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 119.) “Generally it is an abuse of discretion to sustain a demurrer without leave to amend if there is any reasonable possibility that the defect can be cured by amendment.” (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349.)

A. Second Cause of Action: Breach of Implied Covenant of Good Faith and Fair Dealing

In every contract, there is an¿implied covenant¿of good faith and fair dealing. (Sutherland v. Barclays American/Mortgage Corp.¿(1997) 53 Cal.App.4th 299, 314.) The covenant of good faith and fair dealing imposes a general duty upon each contracting party “to perform faithfully and not to deprive the other party of the benefits of the contract.” (Floystrup¿v. City of Berkeley Rent Stabilization Bd.¿(1990) 219 Cal.App.3d 1309, 1318.)¿¿

A breach of the¿implied covenant¿of good faith and fair dealing requires something more than breach of the contractual duty itself. (Careau¿& Co v. Security Pacific Business Credit, Inc.¿(1990) 222 Cal.App.3d 1371, 1394 (Careau).) “Thus, allegations which assert such a claim must show that the conduct of the defendant, whether or not it also constitutes a breach of a consensual contract term, demonstrates a failure or refusal to discharge contractual responsibilities, prompted not by an honest mistake, bad judgment or negligence but rather by a conscious and deliberate act, which unfairly frustrates the agreed common purposes and disappoints the reasonable expectations of the other party thereby depriving that party of the benefits of the agreement.” (Id.¿at 1395.)

Defendant contends the Complaint seeks to convert a breach of contract action into a “quasi-tort” claim with the second cause action, and it is therefore insufficiently pleaded. (Demurrer, 7-8.) “A security guard did not show up. If true, it is a breach of contract. The breach allegedly occurred as a result of mistake, bad judgment or negligence. This act, however, does not state a cause of action for breach of covenant of good faith and fair dealing.” (Id.) Defendant therefore contends the second cause of action fails to plead sufficient allegations for a breach beyond the breach of a contractual duty, as alleged in the first cause of action. (Id.)

In opposition, Plaintiff contends “the covenant is necessarily an implied supplement to the express contractual agreement between the parties...Defendant failed to perform – for reasons that may extend beyond a naked contractual breach, thereby appropriately giving rise to tort remedies.” (Opp., 6.) Plaintiff therefore contends Defendant was “vested with discretionary power which would affect Plaintiff’s property rights,” and the exercise of such power “constitutes bad faith” where Defendant’s “failure to secure the Subject Property may be beyond an honest mistake, possibly a conscious and deliberate act...” (Opp., 6-7.) However, Plaintiff fails to allege sufficient facts here, beyond mere conclusory claims and arguments of potential bad faith, to show that a separate tort claim can be based on Defendant’s conduct.

In reply, Defendant contends that the “only obligation of Alliance under the oral contract was to provide guard services. There was nothing discretionary about this. Alliance could not abuse a discretion that was not found in the contract.” (Reply, 4.) The court agrees. Plaintiff’s contention that Alliance could exercise its discretion to breach the contract, does not evince any discretionary authority for Defendant within the Agreement.

As such, the court finds the second cause of action is insufficiently pled. For these reasons, Defendant’s demurrer to the second cause of action is sustained.

The elements of a fraud cause of action are: (1) misrepresentation (false representation, concealment, or omission); (2) knowledge of falsity; (3) intent to induce reliance; (4) justifiable reliance; and (5) resulting damage. (Davis v. Southern California Edison Co. (2015) 236 Cal.App.4th 619.) “The defendant's intent to induce the plaintiff to alter his position can be inferred from the fact that defendant knew the plaintiff would act in reliance upon the representation.” (Eddy v. Sharp (1988) 199 Cal.App.3d 858, 864.)

Fraud must be pled in the complaint specifically. General and conclusory allegations are not sufficient. (Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 74; Nagy v. Nagy (1989) 210 Cal.App.3d 1262, 1268.) Unlike most causes of action where the “the policy of liberal construction of the pleadings,” fraud requires particularity, that is, “pleading facts which show how, when, where, to whom, and by what means the representations were tendered.” (Stansfield, supra, 220 Cal.App.3d at 73; Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.) Every element of a fraud cause of action must be alleged both factually and specifically. (Hall v. Department of Adoptions (1975) 47 Cal.App.3d 898, 904; Cooper v. Equity General Insurance (1990) 219 Cal.App.3d 1252, 1262.)

Defendant contends that the third cause of action is insufficiently pled because it does not plead Defendant’s fraudulent misrepresentations with the requisite specificity. (Demurrer, 4-5.) Specifically, Defendant contends that Plaintiffs’ fraud cause of action fails because Plaintiff’s fraud cause of action does not allege what misrepresentations were made, who made them, when they were made, and whether they were ratified by Defendant. (Demurrer, 6-7.)

In opposition, Plaintiff claims the “Complaint contains numerous factual allegations from which intent to defraud may be inferred, or is expressly pleaded.” (Opposition, 7.) However, Plaintiff fails to point to specific paragraphs of the Complaint where such allegations are made, and instead requests this court to embark on a fishing expedition for facts and inferences. Plaintiff further contends that the Complaint was only required to plead an intent to induce reliance, not an intent to defraud. (Id.) Plaintiffs rely on Apollo Capital Fund LLC v. Roth Capital Partners, LLC, (2007) 158 Cal. App. 4th 226, 257 for this contention. (Id.; incorrectly cited as “Apollo Capital Fund, LLC 158 Cal.App.4th at 257.”) While Plaintiff further contends that Defendant possesses “full information concerning the facts of the controversy,” Plaintiff fails to explain why facts regarding the identity of persons who made the representations are known only to Plaintiff. (Opp., 8.) “Defendant is far more likely to know the names of the employees who talked to Plaintiff than Plaintiff is.” (Id.) That is not the relevant inquiry for lowered pleadings standards for fraud causes of action, and Plaintiff fails to show how other facts required to show a fraud claim have been alleged aside from identity.

Here, the Complaint alleges that Defendant intended to induce reliance and subjected Plaintiff to “fraudulent misrepresentations pertaining to defendant ALLIANCE’s professional qualifications and ability/intentions to protect the Subject Property...” (Complaint, ¶¶ 34-5.)

The court finds that Plaintiff’s third cause of action is insufficiently pled. The court agrees with Defendant that the third cause of action lacks necessary factual allegations to uphold a fraud claim, and Plaintiff’s conclusory claims of satisfying the heightened standard provide no relief for their position.

For these reasons, Defendants’ demurrer to the third cause of action is sustained.

C. Fourth Cause of Action: Violation of Business and Professions Code § 17200

Business & Professions Code § 17200 (“UCL”) prohibits “unfair competition,” which is defined to include “any unlawful, unfair or fraudulent business act or practice” and “unfair, deceptive, untrue or misleading advertising” and any act prohibited by Bus. Prof. Code § 17500. Section 17500 prohibits false or misleading statements in connection with the disposal of property or performance of services. A cause of action under the UCL must be stated with “reasonable particularity.” (Gutierrez v. Carmax Auto Superstores California (2018) 19 Cal.App.5th 1234, 1261.)

The UCL prohibits: (1) unlawful conduct; (2) unfair business acts or practices; (3) fraudulent business acts or practices; (4) unfair, deceptive, untrue or misleading advertising; and (5) any act prohibited under §§ 17500-77.5.¿ UCL actions based on “unlawful” conduct may be based on violations of other statutes.¿ (See¿Klein v. Chevron U.S.A., Inc. (2012) 202 Cal.App.4th 1342, 1383.)

Here, Defendant contends the fourth cause of action is insufficiently pled “because a security guard not showing up for work is not an illegal business practice.” (Demurrer, 8-9.) Defendant also contends that UCL claims only provide for injunctive relief, but Plaintiff requests monetary damages as to the fourth cause of action. (Id.)

In opposition, Plaintiff correctly explains unfair competition to have an expansive definition as elaborated above. (Opp., 8-9.) Plaintiff further contends the “Complaint alleges that Defendant’s conduct amounts to unfair, misleading, and deceptive practices,” and references ¶ 39 of the Complaint as incorporating these allegations. (Id.) Curiously, Plaintiff cites to caselaw regarding the payment of insurance premiums and seeks to analogize to the circumstances before the court in this action, stating “Plaintiff herein has paid insurance premiums on policies where coverage is alleged not to have been provided, which constitutes sufficient loss to confer standing...” (Opp., 10.) However, Plaintiff fails to explain which factual allegations support any claims of misleading or deceptive practices, and further fails to explain why supporting authorities for the imposition of UCL claims for insurance premiums can be applied here to the Agreement between the parties.

In reply, Defendant contends “there is no illegal, unfair, or deceptive business practice that Alliance engaged in. A guard was not on duty on June 3, 2021.” (Reply, 4-5.)

The court agrees that the fourth cause of action lacks factual allegations of specific business practices which Plaintiff contends violate the UCL. Further, the Complaint fails to explain which business practices are in violation of the UCL, and instead makes the conclusory claim that all of Defendant’s conduct violates the UCL. As such, the court finds the fourth cause of action to be insufficiently pled.

For these reasons, Defendant’s demurrer to the fourth cause of action is sustained.

Defendant’s demurrer is sustained. Plaintiff is granted 30 days leave to amend. Defendant to give notice.

[1] Defendants submit the declaration of their attorney, J. Michael Echevarria (“Echevarria”) to demonstrate that they have fulfilled their statutory meet and confer obligations required by CCP § 430.41 prior to filing the instant demurrer. Echevarria attests that on August 5, 2022, he sent Plaintiff’s counsel a meet and confer letter regarding the issues raised in the instant motion; Plaintiff’s counsel responded by saying he would provide points and authorities; and subsequently, the parties “were unable to resolve [their] disputes.” (Echevarria Decl. ¶2.) The Echevarria Declaration is insufficient for purposes of CCP § 430.41, as the declaration makes clear that the parties have not met and conferred around the issues in this demurrer. However, as failure to meet and confer is not grounds to overrule a demurrer, the court continues with the analysis of the merits.