Judge: Gary I. Micon, Case: 24CHCV00274, Date: 2024-04-19 Tentative Ruling
Case Number: 24CHCV00274 Hearing Date: April 19, 2024 Dept: F43
Dept. F43
Date: 4-19-24
Case #24CHCV00274, Nafis Memon, et al. vs. Ford Motor
Company, et al.
Trial Date: N/A
DEMURRER
MOVING PARTY: Defendants Ford Motor Company and Galpin
Motors
RESPONDING PARTY: Plaintiffs Nafis Memon and Nousheen
Memon
RELIEF REQUESTED
Demurrer to the Complaint
·
5th Cause of Action for Negligent
Repair
·
6th Cause of Action: Fraudulent
Inducement – Concealment
RULING: Demurrer is sustained with leave to amend.
SUMMARY OF ACTION
On February 23, 2023, Plaintiffs Nafis Memon and Nousheen
Memon (Plaintiffs) entered into a warranty contract with Defendant Ford Motor
Company for a 2022 Lincoln Navigator. (Comp., ¶ 9.) Plaintiffs allege that the vehicle had
transmission defects, engine defects, and other defects and non-conformities.
(Comp., ¶ 14.)
Plaintiffs allege that Defendant Ford Motor Company knew
of the transmission defects prior to sale of the vehicle. (Comp., ¶¶ 25-26.) Plaintiffs also alleges that they
would not have purchased the vehicle had they known about the defect (Comp., ¶ 35.)
Finally, Plaintiffs allege that Defendant did not disclose the defects to
Plaintiffs, despite having knowledge of the defects. (Comp., ¶ 36.)
On January 25, 2024, Plaintiffs filed their complaint with
six causes of action for (1) – (4) Violations of the Song-Beverly Act; (5)
Negligent Repair; and (6) Fraudulent Inducement – Concealment.
Defendants Ford Motor Company and Galpin Motors
(Defendants) filed their demurer to the Fifth and Sixth Causes of Action on February
28, 2024. Plaintiffs filed their opposition to Defendants’ demurrer on April 8,
2024. Defendants filed their reply on April 11, 2024.
ANALYSIS
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(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.) “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.” (CCP
§ 452.) 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 applying these standards, the court liberally
construes the complaint to determine whether a cause of action has been stated.
(Picton v. Anderson Union High School
Dist. (1996) 50 Cal.App.4th 726, 733.)
Fifth Cause of Action for Negligent Repair
Defendants demur to Fifth Cause of Action on the basis that
it fails to allege facts sufficient to state a cause of action and is
uncertain.
To state a claim for negligent repair, a plaintiff needs to
allege that the repair facility (1) owed a duty to use ordinary care and skill,
(2) breached its duty, (3) caused damage to the plaintiff, and (4) that this
was causation of damages. (Burgess v. Superior Court (1992) 2 Cal.4th
1064, 1072.)
Defendants have demurred to this cause of action on the
basis that Plaintiffs cannot allege a tort claim when it arises from the
parties’ underlying contract because of the economic loss rule. (See Sheen
v. Wells Fargo Bank, N.A. (2002) 12 Cal.5th 905, 923-924; Erlich v.
Menezes (1999) 21 Cal.4th 543, 551-552 [explaining that “[t]ort damages
have been permitted in contract cases” when “the duty that gives rise to tort
liability is either completely independent of the contract or arises from
conduct which is both intentional and intended to harm”].)
The only relevant case that really discusses whether a
negligence cause of action may be maintained in situations such as this is Mega
RV Corp. v. HWH Corp. (2014) 225 Cal.App.4th 1318. In that case, the Court of
Appeal found that:
“There was no tort committed by any
defendant vis-a-vis the Ertzes. The Ertzes never sued Mega RV or any other
party for negligence (or any other tort), and never alleged they suffered any
personal injury or damages to other property (besides the portions of the motor
home that were alleged to be defective) as a result of the alleged defects in
the motor home. It appears doubtful that a cause of action could be stated in
tort under these circumstances, as a claim based on negligence or even strict
liability will not lie where the wrong resulted only in economic loss rather
than actual damage to person or property…HWH’s pleading of the case as one
sounding in tort for purposes of indemnity did not change the essential nature
of this warranty dispute.” (Id. at 1338.)
Defendants appear to be arguing that Plaintiffs’ negligent
repair cause of action would not be distinct from Plaintiffs’ Song-Beverly
causes of action and would be barred by the economic loss rule as discussed in Mega
RV Corp. Defendants are arguing that the negligent repair cause of action
would be part of Plaintiffs’ breach of warranty causes of action. However, it
is important to note that Plaintiffs’ first few causes of action for breach of
the Song-Beverly Act are only against Defendant Ford Motor Company, as the
warranty was issued by it. Plaintiffs’ negligent repair cause of action is only
against Defendant Galpin Motors, the repair facility that attempted to repair
Plaintiffs’ vehicle.
Any tort liability that Galpin Motors would have for
negligently repairing Plaintiffs’ vehicle would arise independently of
Plaintiffs’ Song-Beverly causes of action against Ford Motor Company. Selling a
lemon and negligently repairing a vehicle are two distinct things. However,
Plaintiffs would likely still need to get past the economic loss rule. As
discussed below, they have not indicated whether they suffered any damages,
whether economic or non-economic.
Plaintiffs’ complaint is very vague as to how Galpin Motors
negligently repaired the vehicle. As Defendants point out in their demurrer,
Plaintiffs’ complaint does not allege what Plaintiffs’ resulting damages were, if
they paid any out-of-pocket costs for repairs performed by Galpin Motors, or if
Plaintiffs suffered non-economic damages to person or property. In fact,
Plaintiffs’ complaint appears to allege that the repairs were covered by the
vehicle’s warranties. (See Comp., ¶ 14.) Without alleging resulting non-economic
damages, Plaintiffs cannot maintain a cause of action for negligent repair.
Defendants’ demurrer to Plaintiffs’ Fifth Cause of Action
for negligent repair is sustained with leave to amend.
Sixth Cause of Action for Fraudulent Inducement –
Concealment
Defendants demur to the Sixth Cause of Action on the basis
that it fails to allege facts sufficient to state a cause of action and because
it is barred by the economic rule.
A fraud cause of action requires a Plaintiff to plead and
prove: “(a) [a] misrepresentation (false representation, concealment, or
nondisclosure); (b) knowledge of falsity (or “scienter”); (c) intent to
defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting
damage.” (Lazar v. Superior Court (1996) 12 Cal 4th 631, 638.) Fraud
causes of action must be pled with specificity. “…This particularity
requirement necessitates pleading facts which ‘show how, when, where, to whom
and by what means the representations were tendered.’” (Stansfield v.
Starkey (1990) 220 Cal.App.3d 59, 73, quoting Hills Trans. Co. v.
Southwest (1968) 266 Cal.App.2d 702, 707.)
Fraud claims against a corporation must “allege the names of
the persons who made the allegedly fraudulent representations, their authority
to speak, to whom they spoke, what they said or wrote, and when it was said or
written.” (Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2
Cal.App.4th 153, 157.)
Plaintiffs’ complaint alleges that Defendant Ford Motor
Company committed fraud by allowing the vehicle to be sold with a transmission
defect despite knowing of the defect’s existence. (Comp., ¶¶ 63-68.) However, Plaintiffs’
complaint does not allege that any specific misrepresentations were made to them
about the transmission defect.
Plaintiffs’ allegations are not enough to satisfy the
pleading requirements for fraud. While Plaintiffs allege that the transmission
defect was not disclosed to them, they do not plead any facts indicating that people
with whom Plaintiffs spoke at the dealership had knowledge of or should have
had knowledge of the defect. They also have not pled whether, if the
representatives at the dealership did have knowledge of the defect, they
intended to defraud Plaintiffs.
Plaintiffs have also failed to plead the requisite
specificity required for fraud actions. They have not pled how, when, where,
and by what means the misrepresentations (or nondisclosures, in this case) were
tendered. Without the specific details regarding the misrepresentations and nondisclosures,
Plaintiffs cannot maintain a cause of action for fraud. Plaintiffs were also
required to allege the names of persons who made the fraudulent statement,
their authority to speak, and what they said. Plaintiffs did not do so.
Defendants argue in their demurrer that Plaintiffs failed to
plead what defect was allegedly concealed. It is unclear why they argue this,
as the complaint clearly indicated that it was a transmission defect. (See
Comp., ¶ 63.)
Next, Defendants argue that Plaintiffs fail to allege a duty
to disclose. Plaintiffs argue in their opposition that they sufficiently
alleged that Defendant Ford Motor Company had a duty to disclose the defect. The
duty to disclose arises in four ways: “(1) when the defendant is in a fiduciary
relationship with the plaintiff, (2) when the defendant had exclusive knowledge
of material facts not known to the plaintiff, (3) when the defendant actively
conceals a material fact from the plaintiff and (4) when the defendant makes
partial representations but also suppresses some material facts.” (Heliotis
v. Schuman (1986) 181 Cal.App.3d 646, 651, quoting 4 Witkin, Summary of
Cal. Law (8th ed. 1974) Torts, §§ 459-464.)
Plaintiffs argue that it is not necessary for a
transactional relationship to exist and that Defendant Ford Motor Company had a
duty to disclose the concealed facts because it had exclusive knowledge of
material facts that were not known to Plaintiff about the defect. While
Plaintiffs’ complaint does allege that Defendant had this knowledge (See Comp.,
¶¶ 64-68.), that is not sufficient by itself to constitute allegations of
fraud. Plaintiffs still need to allege the requisite specificity.
Defendants also argues that Plaintiffs’ cause of action for
fraudulent inducement would be barred because of the economic loss rule.
Despite Defendant’s arguments to the contrary, a fraudulent inducement cause of
action would not be barred by the economic loss rule. It is a long-standing
principle in California law that a party may recover for both breach of
contract and fraud. (See Lazar v. Superior Court (1996) 12 Cal.4th 631,
645; see also Freeman & Mills, Inc. v. Belcher Oil Co. (1995) 11
Cal.4th 85, 108 (Plaintiffs permitted to recover exemplary damages in cases
where the breached contract was induced through promissory fraud).) “Although
punitive damages may not be awarded where defendant merely breaches a contract…such
damages may be awarded where defendant fraudulently induces Plaintiffs to enter
into a contract. Fraudulent inducement to enter into a contract constitutes a
tort.” (Kuchta v. Allied Builders Corp. (1971) 21 Cal.App.3d 541, 549;
see also Walker v. Signal Companies, Inc. (1978) 84 Cal.App.3d 982,
996.)
In Defendants’ demurrer, Defendants attempt to use Robinson
Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979 to support their
position that a cause of action for fraudulent concealment is barred by the
economic loss rule. However, the Supreme Court in Robinson specifically
did not address the issue of concealment. “Because Dana’s affirmative
intentional misrepresentations of fact…are dispositive fraudulent conduct
related to the performance of the contract, we need not address the issue of
whether Dana’s intentional concealment constitutes an independent tort.” (Robinson,
34 Cal.4th at 991.) The Court is not persuaded by Defendants’ argument that
this case found that the economic loss rule bars fraudulent concealment causes
of action, as the Supreme Court clearly indicated that it was not addressing
that issue. A recent Court of Appeal case found that the economic loss rule
does not bar fraudulent concealment causes of action. (Dhital v. Nissan
North America, Inc. (2022) 84 Cal.App.5th 828 [review granted, Feb. 1,
2023, S277568].) The question of whether fraudulent concealment cases are
barred by the economic loss rule is still open and the question has yet to be
addressed by the California Supreme Court.
While Plaintiffs have not alleged sufficient allegations to
maintain a cause of action for fraudulent inducement – concealment, pleading
that cause of action is not barred by the economic loss rule under current case
law.
Defendants’ demurrer to Plaintiffs’ Sixth Cause of Action is
sustained with leave to amend.
CONCLUSION
Defendants’ demurrer to Plaintiffs’ Fifth and Sixth Causes
of Action is sustained with leave to amend.
Plaintiff is given 30 days leave to amend.
Moving party to give notice to all parties.