Judge Gail Killefer, Case Number: 24STCV16540, Date: 2025-06-16 Tentative Ruling

MOVING PARTY: Plaintiffs/Cross-Defendant R Chapter 3, LLC; J & J 7880, LLC; and Opus 1645, LLC

OPPOSING PARTY: Defendants/Cross-Complainants Wilcox Wilcox, LLC; Mark Houston, Jonathan Houston, and Ploenpidh Houston

TENTATIVE: Cross-Defendants’ demurrer to Mark and Jonathan Houston is sustained with leave to amend. The demurrer to the 3rd, 4th, and 5th causes of action are sustained with leave to amend and overruled as to the 1st, 2nd, and 6th causes of action. Cross-Defendants’ motion to strike is granted with leave to amend. Cross-Complainants are granted 10 days leave to amend. The court sets the OSC RE: Amended Cross-Complaint for July 25, 2025, at 8:30 a.m. Cross-Defendants to give notice.

On July 2, 2024, R Chapter 3, LLC and J & J 7880, LLC and Opus 1645, LLC (collectively “Plaintiffs”) filed a Complaint for breach of lease against Wilcox Wilcox, LLC and Ploenpidh Houston; and Does 1 to 50.

On February 24, 2025, Wilcox Wilcox, LLC; Mark Houston, Jonathan Houston, and Ploenpidh Houston filed a Cross-Complaint against Plaintiffs R Chapter 3, LLC; J & J 7880, LLC; and Opus 1645, LLC and Roes 1 to 50.

The operative Second Amended Cross-Complaint (“SACC”), filed February 24, 2025, alleges six causes of action: (1) Breach of Contract; (2) Breach of the Covenant of Quiet Enjoyment; (3) Fraudulent Misrepresentation or Concealment; (4) Negligence; (5) Unfair Business Practices (Violation of California Business and Professions Code § 17200); and (6) Abatement of Rent. Mark Houston and Jonathan Houston were added as Cross-Complainants.

Plaintiffs/Cross-Defendants demur and move to strike to the SACC. Cross-Complainants oppose the demurrer and motion to strike. The matter is now before the court.

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.)¿¿

¿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”].)¿¿¿¿

“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.)¿¿¿

Demurrer[1]

On August 8, 2022, Plaintiffs/Cross-Defendants, as landlord, and Cross-Complainants, as tenants, signed a 10-year lease (the “Lease”) for a property located in Los Angeles, CA (the “Premises”). (SACC, ¶ 11.) Section 25(d) of the Lease obligated the landlord to maintain and repair the premises in a timely manner. (Id. ¶ 22.) On March 31, 2024, while Cross-Complainants were preparing for their grand opening, they experienced a plumbing backup resulting in sewage spilling in the kitchen, bar, and restrooms. (Id. ¶¶ 14, 15.) The unsanitary conditions prevented Cross-Complainants from opening and operating the restaurant. (Id. ¶ 16.)

The SACC asserts that Cross-Complainants promptly informed Cross-Defendants of the plumbing issue and Cross-Complainants assert they were instructed to take no corrective actions as Cross-Defendants would address and resolve the plumbing problems. (SACC, ¶¶ 17, 21.) On April 1, 2024, Cross-Defendants’ property manager, Crystal Crow, conducted a site survey of the plumbing issues and advised Cross-Complainants to cease occupancy and operations due to unsafe conditions. (Id. ¶ 24.) A plumbing contractor was not sent to the Premises until early May 2024, and repairs were not substantially completed until July 2024. (Id. ¶ 26.)

On August 2, 2024, Cross-Defendants met with Crystal Crow and the parties agreed to work to resolve the remaining issue. Crystal Cove informed Cross-Complainants they were not to perform any work to clear up the incomplete plumbing and concrete work. (SACC, ¶ 29.) In August 2024, Cross-Complainants sent a construction crew to break open, repair, and re-pour the concrete, which needed time to settle. (Id. ¶ 30.) Subsequently, the work on the concrete was abandoned, and the final finishing and matching of the original flooring remained incomplete. (Id. ¶ 31.)

The SACC alleges that Cross-Defendants knew significant plumbing problems existed and failed to disclose them to Cross-Complainants. (SACC, ¶ 25.) Cross-Complainants assert that Cross-Defendants’ inaction as landlord caused Cross-Complainants to suffer damages, including lost profits, loss of business opportunities, costs, and additional expenses. (Id. ¶ 32.)

Cross-Complainants do not attach a copy of the Lease despite pleading a breach of lease claim. “If the action is based on alleged breach of written contract, the terms must be set out verbatim in the body of the complaint or a copy of the written agreement must be attached and incorporated by reference.” (Harris v. Rudin, Richman & Appel (1999) 74 Cal.App.4th 299, 308.) Cross-Defendants do not demur to the breach of lease claim on this basis; thus, the court does not consider this point in addressing Cross-Defendants’ demurrer.

Cross-Defendants argue that because Mark and Jonathan Houston were not named parties in the original complaint, they were not entitled to file a cross-complaint without obtaining leave of court.

(a) A party shall file a cross-complaint against any of the parties who filed the complaint or cross-complaint against him or her before or at the same time as the answer to the complaint or cross-complaint.

(b) Any other cross-complaint may be filed at any time before the court has set a date for trial.

(c) A party shall obtain leave of court to file any cross-complaint except one filed within the time specified in subdivision (a) or (b). Leave may be granted in the interest of justice at any time during the course of the action.

Cross-Complainants agree with Cross-Defendants stating “Cross-Complainants’ position is that the arguments of the Cross Defendants is [sic] correct and the proper Cross-Complainants’ request that Mark Houston and Jonathan Houston may seek Court approval to be added as parties.” (Opposition, at p. 7:12-14.)

Accordingly, the court sustains the demurrer as to Mark and Jonathan Houston with leave to amend.

Every lease includes a covenant of quiet possession and enjoyment. (See Civ. Code § 1927, Erlach v. Sierra Asset Servicing, LLC (2014) 226 Cal.App.4th 1281, 1299.) “ ‘It has long been the rule that in the absence of language to the contrary, every lease contains an implied covenant of quiet enjoyment.’ ” (Nativi v. Deutsche Bank National Trust Co. (2014) 223 Cal.App.4th 261, 291 (Nativi).) “ ‘In recent years, the covenant of quiet enjoyment has been expanded, and in this state, for example, it insulates the tenant against any act or omission on the part of the landlord, or anyone claiming under him, which interferes with a tenant's right to use and enjoy the premises for the purposes contemplated by the tenancy. [Citations.]’” (Id. at pp. 291-292.)

“It is not necessary to show that the landlord acted with the subjective intent to compel the tenant to leave the property or deprive the tenant of quiet enjoyment.” (Nativi, supra, 223 Cal.App.4th at pp. 291–292.) “There is a ‘presumption that a landlord intends the natural and probable consequences of his acts; and where the acts of the landlord effectively deprive the tenant of the use and enjoyment of the premises, the intent to evict is implied from the character of the acts done. [Citations.]’ ” (Id. at p. 292 [internal citations omitted].)

Cross-Defendants argue in the demurrer to the 2nd cause of action that their Complaint alleges that Cross-Complainants have failed to pay rent, which is a condition precedent under the lease. Section 7(a) of the Lease states:

SECTION 7(a): Upon payment by Tenant of the rents herein provided, and upon the observance and performance of all of the covenants, terms and conditions on Tenant's part to be observed and performed, Tenant shall peaceably and quietly hold and enjoy the Leased Premises for the Term without hindrance or interruption by Landlord or any other person or persons lawfully or equitably claiming by, through or under the Landlord, subject, nevertheless, to the terms and conditions of this Lease.

The SACC states “[t]he Cross Claimants has performed all conditions and covenants to be performed by them, except what has been excused by the Cross Defendants.” (SACC, ¶ 43.) As the court takes the material allegations in the SACC as true, the court cannot rely on Plaintiffs/Cross-Defendants’ Complaint and its contradicted allegations that Cross-Defendants failed to perform their obligations under the Lease, as these facts are disputed and the court does not adjudicate issues of disputed fact on demurrer. “‘It is not the ordinary function of a demurrer to test the truth of the plaintiff's allegations or the accuracy with which [the plaintiff] describes the defendant's conduct. A demurrer tests only the legal sufficiency of the pleading.’” (Roe v. Hesperia Unified School District (2022) 85 Cal.App.5th 13, 30.)

“The elements of a cause of action for negligence are well established. They are (a) a legal duty to use due care; (b) a breach of such legal duty; [and] (c) the breach as the proximate or legal cause of the resulting injury.” (Ladd v. County of San Mateo (1996) 12 Cal.4th 913, 917 [internal quotations omitted].) “A duty may arise through statute, contract, or the relationship of the parties.” (Lichtman v. Siemens Industry Inc. (2017) 16 Cal.App.5th 914, 920 [internal quotations and citations omitted].)

As to the 4th cause of action, Cross- Defendants’ demurrer argues that the negligence claim is barred by the economic loss rule. California law does not permit a plaintiff to recover tort damages for contract claims. As explained by the California Supreme Court, “the economic loss rule prevents the law of contract and the law of tort from dissolving into the other.” (Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal. 4th 979, 989.) “[T]he rule functions to bar claims in negligence for pure economic losses in deference to a contract between litigating parties.” (Sheen v. Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905, 922 (Sheen).)

Cross-Defendants assert that the negligence is inextricably tied to the alleged contractual obligations under the Lease, as every purported breach stems directly from the landlord-tenant relationship and duties imposed by Lease rather than a duty independent of the contract. “In general, there is no recovery in tort for negligently inflicted “purely economic losses,” meaning financial harm unaccompanied by physical or property damage.” (Sheen, supra, 12 Cal.5th at p. 922.)

The SACC alleges that Cross-Defendants breached the duty of care to maintain the Premises in a safe and operational condition by failing to repair the defective pipes prior to the Cross-Complainants executing the Lease. Cross-Defendants fail to cite any case law showing that prior to Cross-Defendants signing the Lease, Cross-Defendants were owed a duty of care obligating Cross-Complainants to make repairs before executing the Lease. Moreover, Section 2 of the Lease states that the Premises is delivered to Cross-Defendants “in ‘As Is’ condition (subject to Landlord repair and maintenance responsibilities set forth in this Lease) and any and all implied warranties are hereby released and waived by Tenant.” (Complaint, Ex. 1 at p. 6.)

The SACC also asserts that Cross-Defendants breached their duty by failing to disclose the defective pipes (SACC ¶ 72(b).) Again, Cross-Defendants fail to state how this duty arose before the execution of the Lease and is not subsumed by the 3rd cause of action for fraudulent misrepresentation and concealment. The SACC also alleges that Cross-Defendants breached their duty by failing to timely hire a contractor for repairs and to complete the work on the concrete. (Id. ¶ 72(c)-(d).) The SACC fails to show how the duty to make timely repairs is not a contractual duty under the Lease and is not barred by the economic loss rule.

Therefore, the demurrer to the negligence cause of action is sustained with leave to amend.

“The essential elements of a count for intentional misrepresentation are (1) a misrepresentation, (2) knowledge of falsity, (3) intent to induce reliance, (4) actual and justifiable reliance, and (5) resulting damage. [Citations.] The essential elements of a count for negligent misrepresentation are the same except that it does not require knowledge of falsity but instead requires a misrepresentation of fact by a person who has no reasonable grounds for believing it to be true. [Citations.] Each element of a fraud count must be pleaded with particularity so as to apprise the defendant of the specific grounds for the charge and enable the court to determine whether there is any basis for the cause of action, although less specificity is required if the defendant would likely have greater knowledge of the facts than the plaintiff. [Citation.]” (Chapman v. Skype Inc. (2013) 220 Cal.App.4th 217, 230–231.)

“The required elements for fraudulent concealment are (1) concealment or suppression of a material fact; (2) by a defendant with a duty to disclose the fact; (3) the defendant intended to defraud the plaintiff by intentionally concealing or suppressing the fact; (4) the plaintiff was unaware of the fact and would have acted differently if the concealed or suppressed fact was known; and (5) plaintiff sustained damage as a result of the concealment or suppression of the material fact.” (Rattagan v. Uber Technologies, Inc. (2024) 17 Cal.5th 1, 40.)

The 3rd cause of action for fraudulent misrepresentation or concealment is premised on “Cross-Defendants knowingly misrepresented or concealed material facts regarding the condition of the Premises, specifically the existence of the significant plumbing issues that were not disclosed to Cross-Claimants” prior to signing the Lease. (SACC, ¶¶ 47, 48.) “Cross Claimants were unaware of the fact and would not have acted as it did if the Cross Claimants had known the concealed or suppressed fact, as it would not have leased the premises in that condition.” (Id. ¶ 60.)

As to the 3rd cause of action, the Cross-Defendants argue that the claim is not pled with the requisite specificity as it fails to state what representations were made by Cross-Defendants real estate agent, Marty Shelton, when the alleged misrepresentations were made, or who within Cross-Defendants’ organization had knowledge of the plumbing issues and intentionally concealed them.

The court agrees that the 3rd cause of action is not properly pled with the requisite specificity. The court also agrees that the 3rd cause of action is uncertain, as the facts stated support a claim for fraudulent concealment, but Cross-Complainants also plead a cause of action for fraudulent misrepresentation without stating what the misrepresentation is and if the misrepresentation was negligent or intentional. While a cause of action may be pled in the alternative, it is improper to combine causes of action under a single cause of action, without distinguishing the facts that support each cause of action.

F. 5th Cause of Action – Unfair Business Practices (Bus. & Prof. Code § 17200 et seq.)

Business and Professions Code § 17200 (“UCL”) prohibits “any unlawful, unfair or fraudulent business act or practice.” (Bus. & Prof. Code, § 17200; see Clark v. Superior Court (2010) 50 Cal.4th 605, 610.) “An unlawful business practice or act is an act or practice, committed pursuant to business activity, that is at the same time forbidden by law.” (Klein v. Earth Elements, Inc. (1997) 59 Cal.App.4th 965, 969.) “A business practice is unfair within the meaning of the UCL if it violates established public policy or if it is immoral, unethical, oppressive or unscrupulous and causes injury to consumers which outweighs its benefits.” (McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1473.) Lastly, a fraudulent business practice claims under section 17200 “is not based upon proof of the common law tort of deceit or deception, but is instead premised on whether the public is likely to be deceived.” (Pastoria v. Nationwide Ins. (2003) 112 Cal.App.4th 1490, 1499.)

The SACC states in a conclusory manner “Cross Defendants engaged in unfair business practices by failing to maintain the Premises and by misrepresenting the suitability of the Premises for its intended use, all of which has been discussed in detail hereinbefore.” (SACC, ¶ 77.) “These actions constitute unfair, unlawful, and/or fraudulent business practices under and Professions Code § 17200.” (Id. ¶ 78.) “These conclusionary allegations, which allege no specific acts, are insufficient to survive demurrer.” (Bagatti v. Department of Rehabilitation (2002) 97 Cal.App.4th 344, 366, fn. 8.)

To plead this statutory claim, the pleadings must state with reasonable particularity the facts supporting the statutory elements of the violation. (Khoury v. Maly's of California, Inc. (1993) 14 Cal.App.4th 612, 619.) Here, the UCL claim is devoid of facts and fails to state if Cross-Complainants are pleading a UCL claim under the unlawful, unfair, or fraudulent prong of the UCL and which facts support each prong.

Lastly, the 5th cause of action requests “damages, including but not limited to lost profits [and] other financial losses.” (SACC, ¶ 80.) However, in a private unfair competition law action, the remedies are “‘generally limited to injunctive relief and restitution.’ ” (Kasky v. Nike, Inc. (2002) 27 Cal.4th 939, 950; see also Bus. & Prof. Code, § 17203.) Therefore, the damages requested by Cross-Complainants are not recoverable under the UCL.

“A tenant is not relieved from the total obligation to pay rent if a landlord does not substantially comply with the applicable health and housing laws; the tenant may withhold payment of the rent until the defects are remedied or until there is a judicial determination as to the fair rent owing to the landlord for the premises in its substandard condition.” (Smith v. David (1981) 120 Cal.App.3d 101, 110.) Retroactive rent abatement is a contract cause of action for breach of the implied warranty of habitability. (Erlach v. Sierra Asset Servicing, LLC (2014) 226 Cal.App.4th 1281, 1297.) However, consequential tort damages for emotional distress, discomfort, annoyance, etc., are recoverable only if a tort theory of recovery is also pleaded. (Id. at p. 1299.)

Here, Cross-Complainants are seeking rent abatement are seeking rent abatement “[d]ue to the significant plumbing issues and the resulting inability to operate” and “failure of Cross Defendants to maintain the Premises in a condition suitable for business operations.” (Id. at p. 83.)

Cross-Defendants assert that the rent abatement is a valid remedy for a breach of lease, constructive eviction, or habitability claim; it should not be plead as a standalone cause of action. The court agrees as it is unclear which cause of action seeks rent abatement as a remedy. Moreover, Cross-Defendants also point out that Section 24(e) states “): Landlord shall not be liable for damages, by abatement of Rent or otherwise . . .” (Complaint, § 24(e) at p. 17.) Cross-Complainants fail to explain how they can seek abatement of rent despite the Lease expressly prohibiting such a remedy.

H. 1st, 2nd, 4th, and 6th Causes of Action - (1) Breach of Contract; (2) Breach of the Covenant of Quiet Enjoyment; (4) Negligence; and (6) Abatement of Rent.

Cross-Defendants also argue that the demurrer to the 1st, 2nd, 4th, and 6th causes of action should be sustained because the SACC seeks damages that were expressly waived by Section 24(e) of the Lease

SECTION 24 (e): Landlord shall not be liable for damages, by abatement of Rent or otherwise, for failure to furnish or delay in furnishing any service (including telephone and telecommunication services), or for any diminution in the quality or quantity thereof, when such failure or delay or diminution is occasioned, in whole or in part, by repairs, replacements, or improvements . . . , gas, water, or other fuel at the Building or Project, by any accident or casualty whatsoever, by act or default of Tenant or other parties, or by any other cause unless resulting from the negligence or willful misconduct of Landlord or the Landlord Parties; and such failures or delays or diminution shall never be deemed to constitute an eviction or disturbance of Tenant's use and possession of the Premises or relieve Tenant from paying Rent or performing any of its obligations under this Lease except as provided in this Lease. Furthermore, Landlord shall not be liable under any circumstances for any consequential damages, including, without limitation, injury to, or interference with, Tenant's business (including, without limitation, loss of profits), however occurring (including, without limitation, if occurring as a result of the negligent acts or omissions of Landlord or any Landlord Parties).

While Cross-Complainants may be barred from seeking consequential damages or special damages, they are still entitled to general damages. If Cross-Defendants seek to challenge the SACC request for certain damages, they should have addressed the issue in a motion to strike. A motion to strike can be used as a scalpel to cut out any “irrelevant, false or improper matters inserted in any pleading.” (CCP § 436(a).) While the demurrer challenges a portion of the SACC’s request for damages, the challenge fails to completely dispose of the 1st, 2nd, and 4th causes of action as Cross-Complainants are still entitled to general damages under those claims. “A demurrer cannot rightfully be sustained to part of a cause of action or to a particular type of damage or remedy.” (Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1047.)

Cross-Defendants seek to strike Paragraphs 25, 32, 33, 34, 36, 40, 41, 44, 47, 48, 53, 57, 58, 59, 61, 62, 63, 64, 65, 66, 67, 68, 71, 72, 73, 74, 77, 78, 79, 82 and Paragraph 4 in the Prayer for Relief.

The only causes of action that the Cross-Complaint asserts for which punitive damages are available are for fraud and negligence causes of action[2]. As the demurrer to those causes of action has been sustained, and no basis exists for punitive damages, the motion to strike punitive damages is granted with leave to amend.

The court also notes that if Cross-Complainants seek punitive damages against a corporate entity, the Cross-Complaint must plead facts showing that a corporate agent acted with malice, fraud, or oppression. (Civ. Code, § 3294.) When the defendant is a¿corporation, “the oppression, fraud, or malice must be perpetrated, authorized, or knowingly ratified by an officer, director, or managing agent of the¿corporation.” (Wilson v. Southern California Edison Company (2015) 234 Cal.App.4th 123, 164; see Civ. Code, § 3294(b).) Here, the SACC failed to identify a corporate agent of Cross-Defendants that acted with malice, fraud or oppression.

Cross Defendants’ demurrer to Mark and Jonathan Houston is sustained with leave to amend. The demurrer to the 3rd, 4th, and 5th causes of action are sustained with leave to amend and overruled as to the 1st, 2nd, and 6th causes of action. Cross-Defendants’ motion to strike is granted with leave to amend. Cross-Complainants are granted 10 days leave to amend. The court sets the OSC RE: Amended Cross-Complaint for July 25, 2025, at 8:30 a.m. Cross-Defendants to give notice.

[1] Pursuant to CCP §§ 430.41 and 435.5(a), the meet and confer requirement has been met. (Lockard Decl., ¶¶ 3, 4.)

[2] A cause of action for breach of the implied covenant of quiet enjoyment “implies a term in a contract, and a breach of the covenant gives rise to an action in contract. As such, the damages available for a breach of the covenant are contract damages.” (Ginsberg v. Gamson (2012) 205 Cal.App.4th 873, 896–897.)