Judge: Gail Killefer, Case: 23STCV20381, Date: 2025-02-20 Tentative Ruling

Case Number: 23STCV20381    Hearing Date: February 20, 2025    Dept: 37

HEARING DATE:                 Thursday, February 20, 2025

CASE NUMBER:                   23STCV20381

CASE NAME:                        Holy Oil Partnership v. Steven Hightower, et al.

MOVING PARTY:                 Defendants Stephen Hightower, Stephen Hightower II, and Hightowers Petroleum Company

OPPOSING PARTY:             Plaintiff Holy Oil Partnership

TRIAL DATE:                        Not set.

PROOF OF SERVICE:           OK

PROCEEDING:                      Demurrer to Third Amended Complaint with Motion to Strike

OPPOSITION:                        2 February 2025

REPLY:                                  11 February 2025

TENTATIVE:                         Defendants’ demurrer is sustained without leave to amend. The motion to strike is granted without leave to amend. Plaintiff is granted 10 days leave to amend. The court sets the OSC RE: Amended Complaint for March 12, 2025, at 8:30 a.m. Defendants to give notice.

Background

On August 24, 2023, Holy Oil Partnerships (“Plaintiff”) filed a Complaint against Stephen Hightower (“Hightower”); Stephen Hightower II (“Hightower II”); Hightowers Petroleum Company (“HPC”) (collectively “Defendants”) and Does 1 to 100.

On March 1, 2024, Plaintiff filed the First Amended Complaint (“FAC”) alleging six causes of action for:

1)     Breach of Contract;

2)     Breach of Implied Covenant of Good Faith and Fair Dealing;

3)     Promissory Estoppel;

4)     Intentional Interference with Prospective Economic Advantage;

5)     Negligent Interference with Prospective Economic Advantage; and

6)     Breach of Fiduciary Duty.

On June 3, 2024, Defendants’ demurrer to the FAC was sustained with leave to amend as to the first, second, third, and sixth causes of action and overruled as to the fourth and fifth causes of action.

On July 3, 2024, Plaintiff filed the Second Amended Complaint (“SAC”) alleging the same six causes of action as the FAC. Defendants filed a demurrer to the SAC and moved to strike the SAC. On September 19, 2024, the demurrer and motion to strike was sustained with leave to amend.  

On November 20, 2024, Plaintiff filed the operative Third Amended Complaint (“TAC”) alleging the same third, fourth, fifth, and sixth causes of action as the FAC and SAC. The third and sixth causes of action are currently at issue. Defendants now demurrer to the TAC. Plaintiff opposes the Motion. The matter is now before the court.

demurrer[1]

I.         Legal Standard

A.        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. (CCP, § 430.30, subd. (a); see also Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)¿“To survive a demurrer, the complaint need only allege facts sufficient to state a cause of action; each evidentiary fact that might eventually form part of the plaintiff’s proof need not be alleged.”¿(C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872.)¿For the purpose of testing the sufficiency of the cause of action, the demurrer admits the truth of all material facts properly pleaded.¿ (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967.)¿A demurrer “does not admit contentions, deductions or conclusions of fact or law.”¿(Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 713.)¿¿ 

B.        Motion to Strike 

¿Any party, within the time allowed to respond to a pleading may serve and file a notice of motion to strike the whole or any part thereof. (CCP, § 435(b)(1); CRC, rule 3.1322(b).) The court may, upon a motion or at any time in its discretion and upon terms it deems proper: (1) strike out any irrelevant, false, or improper matter inserted in any pleading; or (2) strike out all or any part of any pleading not drawn or filed in conformity with the laws of California, a court rule, or an order of the court. (CCP, § 436(a)-(b); Stafford v. Shultz (1954) 42 Cal.2d 767, 782 [“Matter in a pleading which is not essential to the claim is surplusage; probative facts are surplusage and may be stricken out or disregarded”].)¿¿¿¿ 

C.        Leave to Amend 

“Where the defect raised by a motion to strike or by demurrer is reasonably capable of cure, leave to amend is routinely and liberally granted to give the plaintiff a chance to cure the defect in question.” (CLD Construction, Inc. v. City of San Ramon (2004) 120 Cal.App.4th 1141, 1146.) The burden is on the complainant to show the Court that a pleading can be amended successfully. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.)¿¿¿ 

III.      Discussion

A.        Third Cause of Action – Promissory Estoppel

“‘The elements of a promissory estoppel claim are ‘(1) a promise clear and unambiguous in its terms; (2) reliance by the party to whom the promise is made; (3)[the] reliance must be both reasonable and foreseeable; and (4) the party asserting the estoppel must be injured by his reliance.’ [Citation.]” (Advanced Choices, Inc. v. State Dept. of Health Services (2010) 182 Cal.App.4th 1661, 1672, citing US Ecology, Inc. v. State of California (2005) 129 Cal.App.4th 887, 901.) “Conceptually, promissory estoppel is distinct from contract in that the promisee's justifiable and detrimental reliance on the promise is regarded as a substitute for the consideration required as an element of an enforceable contract.” (Signal Hill Aviation Co. v. Stroppe (1979) 96 Cal.App.3d 627, 640.)

The court finds that the TAC fails to plead a clear and unambiguous promise as the TAC fails to state what Defendants’ obligations were in taking the lead on the P3 Project outside of bringing their expertise to the Project. (TAC, ¶ 78.) Plaintiff further asserts that they justifiably relied on Defendants’ promise by securing additional partners and reached agreements with Kowrii Bank and Lincoln Avenue Brewery to support the P3 Project and incurred substantial expenses by conducting extensive research, engaging with potential partners, and covering costs to advance the P3 Project, all in reliance on Defendants’ assurances. (Id., ¶¶ 83-84.)

Plaintiffs describe early research and business plans in support of their claim that do not establish a clear and unambiguous promise or reliance. The TAC fails to show that Plaintiff’s agreement with Lincoln Avenue Brewery was reasonable given the fact that the plot for the City Gas station had not been sold, the City had not approved the purchase, and the gas station had not yet been built. Moreover, the agreement with Kowrii Bank was finalized on or about February 12, 2021, as evidenced by the cashier’s check. (TAC, ¶ 56, Exhibit 7.) However, the TAC asserts that the agreement was reached on March 18, 2022, therefore Plaintiff could not have relied on Defendants’ promises related to the Kowrii Bank transaction when the Promise had not yet been made. (Id., ¶ 76.)

Plaintiff further asserts that they justifiably relied on Defendants’ promise by securing additional partners and reached agreements with Kowrii Bank and Lincoln Avenue Brewery to support the P3 Project and incurred substantial expenses by conducting extensive research, engaging with potential partners, and covering costs to advance the P3 Project, all in reliance on Defendants’ assurances, however, there is no connection made between the Defendants’ promises and these expenditures because there was no direction given to do so. (TAC, ¶¶ 81-86.) Defendants’ alleged assurances are still unclear, and there are no facts to show that Defendants directed these expenditures. The uncertainties surrounding the alleged agreement provide no basis for a clear and unambiguous promise sufficient to support a claim for promissory estoppel.

The TAC fails to show that Plaintiff’s agreement with Lincoln Avenue Brewery was reasonable given the fact that the plot for the City Gas station had not been sold, the City had not approved the purchase, and the gas station had not yet been built. Moreover, the agreement with Kowrii Bank was finalized on or about February 12, 2021, as evidenced by the cashier’s check. (TAC, ¶ 119.) However, the TAC asserts that the agreement was reached on March 18, 2022, therefore Plaintiff could not have reasonably relied on Defendants’ promises related to the Kowrii Bank transaction when the Promise had not yet been made, and it would be unforeseeable and speculative to do so. (Id. ¶ 76.)

The demurrer to the third cause of action is sustained without leave to amend.

B.        Sixth Cause of Action – Breach of Fiduciary Duty

“‘[B]efore a person can be charged with a fiduciary obligation, he must either knowingly undertake to act on behalf and for the benefit of another, or must enter into a relationship which imposes that undertaking as a matter of law.’” (Hassov. Hapke (2014) 227 Cal.App.4th 107, 140 (quoting Committee on Children’s Television, Inc. v. General Foods Corp.(1983) 35 Cal.3d 197, 221).) “A fiduciary duty under common law may arise ‘when one person enters into a confidential relationship with another.’” (Id.) A¿partnership relationship is a fiduciary relationship. (See Cleveland v. Johnson (2012) 209 Cal.App.4th 1315, 1338.)

Defendants’ demurrer to the sixth cause of action on the basis that the TAC fails to plead the existence of a fiduciary relationship because there was no Partnership Agreement. The TAC alleges that the Parties “impliedly agreed to run a business together with the intent to share profits.” (TAC, ¶ 122).

“Except as otherwise provided in subdivision (b), the association of two or more persons to carry on as coowners a business for profit forms a partnership, whether or not the persons intend to form a partnership.” (Corp. Code, § 16202(a).) Therefore, a partnership can be created by implied conduct. “[T]he existence of a partnership may be established although the parties may not have used the words ‘partner’ or ‘partnership’; nor is it essential that the parties should have known that their contract in law created a partnership. [Citation.] It is the intent to do the things which constitute a partnership that usually determines whether or not that relationship exists between the parties.” (California Employment Stabilization Commission v. Walters (1944) 64 Cal.App.2d 554, 558.) “Whether a partnership or joint venture exists is primarily a factual question to be determined by the trier of fact from the evidence and inferences to be drawn therefrom.” (Bank of California v. Connolly (1973) 36 Cal.App.3d 350, 364.)

The court finds that Exhibits 2 to 7 and 8 to 11 reflect an agreement to enter an undertaking of a business venture. A¿partnership relationship is a fiduciary relationship. (See Eneav. Superior Court( 2005) 132 Cal.App.4th 1559, 1564.) Corp. Code, § 16404 outlines that the “[t]he fiduciary duties a partner owes to the partnership and the other partners are the duty of loyalty and the duty of care set forth in subdivisions (b) and (c)” of § 16404. Therefore, the court finds that the TAC sufficiently alleges that Defendants owed a fiduciary duty to Plaintiff due to the existence of a partnership agreement.

Nevertheless, Plaintiff fails to show a breach of fiduciary duty and damages proximately caused by the breach. The court sustained the prior demurrer because the City’s land acquisition and construction of the City Gas fueling station were conditions precedent to the Defendants’ performance. (See Order 09.19.2024.) Without the land acquisition and City Gas fueling station, Defendants were not obligated to “bring[] their expertise from their construction division known as Hi Mark Construction, their expertise from their EV and Solar division known as HP Energy as well as their fuel distribution and delivery expertise from Hightower Petroleum, and their expertise on government contract bidding.” (TAC, ¶ 36.) Similarly, without the City moving to construct the City Gas fueling station, Defendants were not obligated to bring a national operator to operate the City Gas station to handle daily operations or deploy its “smart grid technology.” (TAC, ¶¶ 38, 41.)

The TAC does not allege that the partnership was dissolved because Hightower II failed to secure funding and “Louisiana and Texas Energy Assets” in violation of the partnership agreement. (TAC, ¶¶ 39, 45.) While the TAC alleges that  the City “embarked on a new partnership opportunity with a local Native American tribe”, the TAC does not allege that Defendant’s failure to fulfill its obligations under the Partnership Agreement was the proximate cause of the City abandoning the partnership. (Id. ¶ 67.) The fact that Defendants committed to sharing the cost of the City Gas and P3 Project, and failed to travel to meet with the City and Plaintiffs, is immaterial unless it was Defendants’ conduct proximately caused the City to abandon the partnership and not continue with the land acquisition and construction of the City Gas fueling station. (TAC, ¶¶ 121, 126.)

The demurrer to the sixth cause of action is sustained without leave to amend.

MOTION TO STRIKE

I.         Discussion

Defendants move to strike the TAC request for punitive damages on the basis that Plaintiff fails to show malice, oppression, or fraud. (See TAC, ¶¶ 100, 128, and Paragraph 3 of Prayer for Relief.)

To state a claim for punitive damages under Civ. Code section 3294, a plaintiff must allege specific facts showing that the defendant has been guilty of malice, oppression, or fraud. (Smith v. Superior Court (1992) 10 Cal. App. 4th 1033, 1042.)¿ The basis for punitive damages must be pled with specificity; conclusory allegations devoid of any factual assertions are insufficient. (Ibid.)¿¿“Malice” is defined in Civ. Code § 3294 (c)(1) as “conduct which is intended by the defendant to cause injury” or “despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.” “Oppression” is “despicable conduct subjecting a person to cruel and unjust hardship in conscious disregard of that person’s rights.” (Civ. Code § 3294(c)(2).) The term “despicable” has been defined in the case law as actions that are “base,” “vile,” or “contemptible.”¿ (Shade Foods, Inc. v. Innovative Products Sales & Marketing, Inc. (2000) 78 Cal.App.4th 847, 891.)¿¿ 

Plaintiff asserts that Paragraph 128 sufficiently allege “how Defendants' actions subjected Plaintiffs to cruel and unjust hardship in conscious disregard of their rights[.]” (Opposition, at p. 2:17-18.) Paragraph 128 states in its entirety:

Defendants’ conduct as alleged herein was performed deliberately, willfully, and in conscious disregard of Plaintiffs’ rights, and was intended to and did injure Plaintiffs’ interest, as set forth herein, and to advance the personal interests of Defendants in violation of the fiduciary duties owed to Plaintiffs, thus justifying an award of punitive damages in an amount to be determined at trial.

(TAC, ¶ 128.)

Defendants’ fails to show that Defendant Stephen Hightower II lying about having COVID-19 and failing to meet further with Plaintiff and the City to discuss the P3 Partnership is conduct that amounts to malice, fraud, or oppression. As this is the second demurrer to Plaintiff’s request for punitive damages, the motion to strike is granted with leave to amend.

Conclusion

Defendants’ demurrer is sustained without leave to amend. The motion to strike is granted with leave to amend. Plaintiff is granted 10 days leave to amend. The court sets the OSC RE: Amended Complaint for March 12, 2025, at 8:30 a.m. Defendant to give notice.