Judge: Gary I. Micon, Case: 24CHCV02059, Date: 2025-01-10 Tentative Ruling
Case Number: 24CHCV02059 Hearing Date: January 10, 2025 Dept: F43
Dept.
F43
Date:
01-10-25
Case
# 24CHCV02059, World Oil Corp. v. MS Electrical Distribution, Inc., et al.
Trial
Date: None set.
DEMURRER AND MOTION TO STRIKE
MOVING
PARTY: Plaintiff/Cross-Defendant World Coil Corp.
RESPONDING
PARTY: Defendant/Cross-Complainant MS Electrical Distribution
RELIEF
REQUESTED
Sustain
Demurrer to the First, Second, Third, Fourth, Fifth, Sixth, Seventh, and Ninth
causes of action. Order striking punitive
damages and other prayers of relief from the First Amended Cross-Complaint.
RULING: Demurrer is
sustained, in part, for the Third and Ninth causes of action with leave to
amend, and the Fourth, Fifth, Sixth, and Seventh causes of action, without
leave to amend. Demurrer is overruled,
in part, for the First and Second causes of action. Motion to strike is granted, with leave to
amend.
SUMMARY
OF ACTION
This
case arises from an alleged breach of a lease agreement and a guaranty
agreement. On June 3, 2024, plaintiff
and cross-defendant World Oil Corp. (World Oil) filed this case against
defendants and cross-complainants MS Electrical Distribution, Inc. and Adel
Mahfoud, (Cross-Complainants), alleging breaches of a lease and a written
guaranty of lease.
On
August 20, 2024, Cross-Complainants filed a cross-complaint against World
Oil. The First Amended Cross-Complaint
(FACC) alleges causes of action for (1) breach of contract; (2) promissory
estoppel; (3) restitution (quasi-contract); (4) fraudulent inducement; (5)
intentional misrepresentation; (6) civil theft; (7) conversion; (8) failure to
return security deposit; and (9) declaratory relief.
The
FACC alleges that on February 1, 2017, MS Electrical executed a written lease
agreement (the Lease) with World Oil to lease property located in Sylmar,
California (the Premises) for $20,871.00 per month for a term of five (5) years
and two (2) months from February 1, 2017 until March 31, 2022. (FACC, ¶ 8.)
On January 5, 2021, MS Electrical and World Oil agreed to extend the
Lease term through March 31, 2027. (FACC,
¶ 9.)
In
November 2023, MS Electrical began experiencing financial difficulties and
ceased paying rent. (FACC, ¶ 10.) MS Electrical’s general manager, Yamen
Mahfoud (Yamen), acting on behalf of Cross-Complainants, presented World Oil
with a potential sublessee who would take over the Lease at a rate of
$38,957.80 per month. (FACC, ¶ 11.) World Oil rejected the sublease offer and on
April 19, 2024, MS Electrical vacated the Premises and surrendered the key to
World Oil’s representative Jim Tostado (Tostado). (FACC, ¶¶ 12, 13.)
From
April to May 2024, the parties engaged in settlement negotiations. (FACC, ¶ 14.)
World Oil offered to release Cross-Complainants from any future claims
related to the breach of the Lease if Cross-Complainants agreed to pay $180,000.00
over a 9-month period. (FACC, ¶¶ 14-15.) World Oil explicitly promised not to file a
lawsuit if Cross-Complainant accepted these settlement terms. (FACC, ¶ 14.)
On
May 29, 2024, Yamen verbally agreed to the settlement terms during a phone
conversation with Tostado. (FACC, ¶
15.) Cross-Complainants also agreed to pay
an initial $30,000.00 installment towards the settlement in the days following
the May 29th phone call. (FACC, ¶ 15.) Yamen subsequently sent Tostado a text
message confirming MS Electrical’s acceptance of these settlement terms. (FACC, ¶ 16.)
On June 5, 2024, Cross-Complainants wired the initial $30,000.00 payment
to World Oil. (FACC, ¶ 18.) World Oil received the payment on June 5,
2024. (FACC, ¶ 19.) Yamen texted Tostado on June 6, 2024 to
confirm receipt of the wire payment.
(FACC, ¶ 19.) Tostado confirmed
receipt. (FACC, ¶ 19.)
However,
World Oil had filed this case against Cross-Complainants on June 3, 2024
without giving prior notice to Cross-Complainants or Yamen. (FACC, ¶ 19.)
As a result, Cross-Complainants allege they have suffered significant
damages including legal fees and costs incurred in defending the case, business
disruption costs, damage to MS Electrical’s credit rating and business
reputation, increased difficulty securing new commercial leases, emotional
distress and anxiety experienced by Mahfoud, and the $30,000.00 payment to
World Oil. (FACC, ¶ 27.)
On
December 4, 2024, World Oil demurred to the FACC’s first, second, third,
fourth, fifth, sixth, seventh, and ninth causes of action and moved to strike
punitive damages and other requests for relief.
Cross-Complainants filed an opposition to the demurrer on December 27,
2024. World Oil replied on January 3,
2025.
MEET
AND CONFER
Before filing a demurrer or motion to strike, the
parties must meet and confer “in person, by telephone, or by video
conference.” (Code Civ. Proc., §§
430.41, subd. (a), 435.5, subd. (a).)
The moving party must file and serve a meet and confer declaration
stating either: (1) the means by which the parties met and conferred, that the
parties did not reach an agreement resolving the issues raised in the demurrer
or motion to strike; or (2) that the party who filed the pleading subject to
the demurrer or motion to strike failed to respond to the meet and confer
request or failed to meet and confer in good faith. (Code Civ. Proc., §§ 430.41, subd. (a)(3),
435.5, subd. (a)(3).)
World
Oil’s counsel, Taylor McElroy, declares that he and Cross-Complainants’ counsel
have met and conferred via phone and email.
(Declaration of Taylor McElroy, ¶ 2.)
These efforts resolved some of the deficiencies in the original cross-complaint,
but several issues still remain in the FACC even after meet and confer efforts. (McElroy Dec., ¶ 3.)
The
meet and confer requirement is met.
SUMMARY
OF ARGUMENTS
World
Oil argues the FACC fails to plead sufficient facts to support the first,
second, third, fourth, fifth, sixth, seventh, and ninth causes of action. World Oil also alleges the first and second
causes of action are uncertain and ambiguous.
Further, the FACC’s causes of action for fraudulent inducement,
intentional misrepresentation, civil theft, and conversion fail because they
are based on alleged representations which are protected by the litigation
privilege. In the alternative, the Court
should strike punitive damages from the FACC and attorneys’ fees and costs from
the first, second, third, fourth, fifth, seventh, and eighth causes of action.
Cross-Complainants
oppose the demurrer. The FACC
sufficiently alleges the specific terms of an oral settlement agreement by stating
Cross-Complainants agreed to pay $180,000.00 over the course of 9 months, with
a $30,000.00 initial payment, in exchange for World Oil’s promise not to
initiate legal action related to the Lease.
The FACC also sufficiently alleges facts giving rise to consequential
damages. Cross-Complainants concede that
the representations supporting their causes of action for fraudulent
inducement, intentional misrepresentation, civil theft, and conversion are protected
by the litigation privilege, and the causes of action should be dismissed with
prejudice. However, the Court should
dismiss the declaratory relief claim without prejudice. Cross-Complainant do not address the motion
to strike.
World
Oil replies reiterating the same arguments.
ANALYSIS
Demurrer
A¿party
may respond to a pleading against it by demurrer on the basis of any single or
combination of eight enumerated grounds, including¿that¿“the pleading does not
state facts sufficient to constitute a cause of action” and is uncertain,
meaning “ambiguous and unintelligible.”
(Code Civ. Proc., § 430.10, subds. (e), (f).) The grounds for
demurring must be 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.) “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.) 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.)
First
Cause of Action: Breach of Contract
World Oil argues the FACC fails to state facts
sufficient to allege a breach of contract claim and that the claim is
uncertain.
To plead breach of contract, a complaint must allege
facts showing (1) the existence of a contract, (2) plaintiff’s performance or
excuse for nonperformance, (3) defendant’s breach, and (4) resulting damages to
plaintiff. (Oasis West Realty, LLC v.
Goldman (2011) 51 Cal.4th 811, 821; Aton
Center, Inc. v. United Healthcare Ins. Co. (2023) 93 Cal.App.5th 1214, 1230
[listing the same elements for breach of an oral contract].)
To show the existence of a contract, the complaint
must allege (1) the parties are capable of contracting, (2) mutual assent, (3)
a lawful object, and (4) sufficient consideration. (Civ. Code, § 1550; Aton Center, Inc.,
supra, 93 Cal.App.5th at p. 1231.)
“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.) To show formation of a valid
contract, the complaint must establish that (1) the contract terms were clear
enough that the parties could understand what each was required to do; (2) the
parties agreed to give each other something of value such as a promise to do or
not do something; and (3) the parties agreed to the terms of the contract. (CACI No. 302.)
1.
Offer,
Terms, and Acceptance
The FACC alleges that Cross-Complainants and World Oil
negotiated an oral settlement agreement between April and May 2024. (FACC, ¶¶ 14-15.) World Oil offered Cross-Complainants the
following: World Oil would not pursue future claims or causes of action related
to the alleged breach of the Lease if Cross-Complainants paid World Oil
$180,000.00 over the course of a 9-month period. (FACC, ¶¶ 14-15.) World Oil explicitly promised not to file a
lawsuit if Cross-Complainants accepted these terms. (FACC, ¶ 14.)
On May 29, 2024, Cross-Complainants’ representative Yamen verbally
agreed to these terms, and to make an initial $30,000.00 payment, during a
telephone call with World Oil representative Tostado. (FACC, ¶ 15.)
Yamen also texted Tostado to confirm acceptance of the terms. (Ibid.) Because the FACC alleges Cross-Complainants
made the first payment on June 5, 2024, the FACC creates the inference that the
final payment would be due nine months from that date.
Accordingly, the FACC demonstrates an offer,
acceptance, and clear and unambiguous terms.
2.
Consideration
“Consideration is present when the promisee confers a
benefit or suffers a prejudice” which was bargained for in exchanged for the
promise. (Property California SCJLW
One Corp. v. Leamy (2018) 25 Cal.App.5th 1155, 1165 .) Consideration is either the benefit to the
promisor or the detriment to the promisee.
(Speirs v. BlueFire Ethanol Fuels, Inc. (2015) 243 Cal.App.4th
969, 987.) “[T]he compromise of disputes
or claims asserted in good faith constitutes consideration for a new
promise.” (Property California SCJLW
One Corp. v. Leamy (2018) 25 Cal.App.5th 1155, 1165.)
“[P]ast consideration will not support a promise
which is in excess of the promisor’s existing debt or duty.” (Leonard v. Gallagher (1965) 235
Cal.App.2d 362, 373.) “When a party is
already bound by a bilateral contract to perform such an act, the promise to
perform, or the performance of, the act is not consideration for a modified
performance by the other party.” (1 Cal.
Real Est. (Miller and Starr, 2018) § 1:57, Performance of a Legal Obligation,
citing Civ. Code, § 1605; see also Dole Food Co., Inc. v. Superior Court
(2015) 242 Cal.App.4th 894, 911; Auerbach v. Great Western Bank (1999)
74 Cal.App.4th 1172, 1185 [“[D]oing or promising to do something one is already
legally bound to do cannot constitute the consideration needed to support a
binding contract.”].) In a bilateral
contract such as the alleged settlement agreement or lease, each party is both
promisor and promisee because both parties exchange promises and confer a
benefit while also suffering a legal detriment.
A promise to perform a preexisting legal duty which
is not the subject of an honest dispute is not consideration. (US Ecology, Inc. v. State of California
(2001) 92 Cal.App.4th 113, 129.)
However, a similar performance is consideration if it differs from the
preexisting duty in a way that reflects more than a pretense for a
bargain. (Second Restatement of the Law
- Contracts, § 73.) Where the different
or additional performance or compensation is bargained for under duress, the
contract may be voidable. (Id.,
illustration 7 [“A owes B a liquidated sum. Any payment by A at an earlier
time, or in a different medium from that required by the duty, is consideration
for B's promise to accept it in full satisfaction if the difference in
performance is part of what is requested and given in exchange for the
promise.”])
World Oil argues that the FACC alleges past
consideration ($180,000.00 past due rent from the Lease) and paying the amount
is the fulfillment of Cross-Complainants’ original obligation under the Lease
thus violating the preexisting duty rule. The FACC admits Cross-Complainants were unable
to meet their rent obligations under the Lease between November 2023 and April
2024 which lead to amount due of $157,860.00.
Cross-Complainants oppose stating that the $180,00.00
would only be considered past consideration if Cross-Complainants had already
paid the money owed and then based on these payments sought to have World Oil
forbear from filing suit. The FACC
alleges fresh obligations (initial $30,000.00 payment and total $180,000.00
payment) Cross-Complainants undertook in exchange for the forbearance of legal
action by World Oil.
The FACC does not allege facts showing the past due
rent amount is in dispute or that Cross-Complainants agreed to the settlement
agreement under duress. The FACC alleges
that under the Lease, MS Electrical would pay World Oil monthly rent of
$20,871.00 to lease the Premises from February 1, 2017 until March 31,
2027. (FACC, ¶¶ 8-9.) MS Electrical ceased paying rent in November
2023 and vacated the premises on April 19, 2024. (FACC, ¶¶ 10-11, 13.) Unlike the terms of the Lease, the alleged
settlement agreement’s terms require Cross-Complainants to pay the $180,000.00 past
due rent over a 9-month period beginning with a $30,000.00 payment on June 5,
2024, in exchange for World Oil not pursuing legal action under the Lease. (FACC, ¶¶ 14-15.) Because of these different terms and different
payment schedule, the FACC sufficiently alleges consideration to support the
alleged settlement agreement.
3.
Performance,
Breach, & Damages
The FACC alleges Cross-Complainants performed their
obligations under the settlement agreement by making the first $30,000.00
payment on June 5, 2024. World Oil
received the payment that same day.
Further, the FACC states World Oil breached the settlement agreement by suing
Cross-Complainants for breach of the Lease and a guaranty agreement on June 3,
2024. As a result, Cross-Complainants
allege they suffer damages including financial losses, reputational damage, and
legal fees and costs the settlement agreement was designed to prevent. (FACC, ¶¶ 40, 42.)
The FACC sufficiently alleges an oral settlement
agreement which World Oil breached.
Accordingly, the Court overrules World Oil’s demurrer
to the first cause of action for breach of contract.
Second
Cause of Action: Promissory Estoppel
World Oil demurs to the second cause of action
because the FACC fails to allege facts sufficient to establish promissory
estoppel.
Promissory estoppel is an equitable claim that “substitutes
reliance on a promise for consideration ‘in the usual sense of something
bargained for and given in exchange.’” (Fleet v. Bank of America N.A.
(2014) 229 Cal.App.4th 1403, 1412–1413 [internal citation
omitted].)
To plead promissory estoppel, the complaint must
allege facts showing “(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.” (Flintco Pacific, Inc. v. TEC Management
Consultants, Inc. (2016) 1 Cal.App.5th 727, 734 [internal citations
omitted].)
“A ‘promise’ is an assurance that a person will or
will not do something.” (Granadino v. Wells Fargo Bank, N.A.¿(2015)
236 Cal.App.4th 411, 417 [internal citation omitted].) An enforceable
promise must be “definite enough that a court can determine the scope of the
duty[,] and the limits of performance must be sufficiently defined to provide a
rational basis for the assessment of damages.” (Garcia v. World Savings, FSB¿(2010)
183 Cal.App.4th 1031, 1045 [internal citations omitted].) Further, “the
fact that a promise is conditional does not render it unenforceable or
ambiguous.” (Ibid.)
World Oil argues the FACC fails to adequately plead
promissory estoppel because Cross-Complainants allege World Oil requested their
performance at the time the promise was made and that the promise was given in
return for proper consideration.
Cross-complainants fail to plead a promise with clear and unambiguous
terms and fail to adequately allege reliance on a promise because the
Cross-Complainants already owed World Oil past due rent.
In opposition, Cross-Complainants state World Oil
mixes confuses the roles of who is promisor and promise and that the FACC
alleges a clear and unambiguous promise. World Oil, the promisor, promised not to sue
Cross-Complainants, the promisee, if Cross-Complainants agreed to pay
$180,000.00 over 9 months.
Cross-Complainants, the promisor, promised to the pay World Oil, the
promisee, $180,000.00, beginning with the June 5th $30,000.00 payment, if World
Oil agreed not to sue. Relying on World
Oil’s promise, Cross-Complainants did something they were not previously bound
to do in precisely that manner and under those terms. Otherwise, Cross-Complainants would not have
paid $30,000.00 and would have sought a different restructuring of the debt, or
challenged certain charges.
The FACC states that World Oil offered to release any
future claims or causes of action related to the alleged breach of the Lease if
Cross-Complainants paid $180,000.00, beginning with an initial installment
payment of $30,000.00 on June 5, 2024, and paid the remaining amount over a
9-month period. (FACC, ¶¶ 14-15, 44.) The FACC also states World Oil “explicitly promised
not to file a lawsuit if the settlement terms were accepted.” (FACC, ¶ 14.) This is sufficiently alleges the scope of the
promise—no litigation based upon breach of the Lease in exchange for
$180,000.00 paid over nine months beginning with the payment on June 5,
2024—and clarifies each party’s duty based on the promise. Mutual intent of the parties was demonstrated
through Cross-Complainants paying $30,000.00 to World Oil and World Oil
confirming the receipt of the payment and retaining the payment. (FACC, ¶¶ 16, 18-19, 45.)
The FACC further states that Cross-Complainants
relied on the promise by agreeing to the terms of the settlement agreement, paying
the initial $30,000.00 to World Oil on June 5, 2024, and refraining from
seeking alternative resolutions to the dispute.
(FACC, ¶ 46.) The FACC alleges
Cross-Complainants’ reliance on World Oil’s representations was foreseeable and
reasonable because of World Oil’s superior knowledge and reputation as an established
commercial real estate business. (FACC,
¶¶ 17, 46.) Finally, the FACC alleges
Cross-Complainants relied on the promise to their detriment which resulted in a
loss of $30,000.00 paid to World Oil, legal fees and costs incurred defending
this lawsuit, and business losses and reputational damage resulting from the
ongoing litigation. (FACC, ¶ 47.)
Accordingly, the Court overrules World Oil’s demurrer
to Cross-Complainants’ second cause of action for promissory estoppel.
Third
Cause of Action: Restitution (Quasi-Contract)
World Oil demurs to the third cause of action for
failing to allege sufficient facts to support a restitution claim based on
quasi-contract. World Oil argues that the
FACC cannot allege both breach of contract and quasi-contract claims based on
the existence of an enforceable verbal settlement agreement arising from the
same subject matter.
In opposition, Cross-Complainants argue that the
phrase “plead this cause of action in the alternative,” is sufficient to avoid
reference to any facts in the breach of contract claim which are unnecessary to
the quasi-contract claim.
A quasi-contract “arises from a legal obligation that
is imposed on the defendant” and “is designed to restore the aggrieved party to
his or her former position by return of the thing or its equivalent in money.” (Unilab Corp. v. Angeles-IPA (2016)
244 Cal.App.4th 622, 639.) A right to
restitution based on quasi-contract arises when “a person obtains a benefit that
he or she may not justly retain” without just compensation” and he
knows or had reason to know the benefit is unjustly retained. (Ibid.)
However, “the fact that one person benefits another is not, by itself,
sufficient to require restitution.” (McBride
v. Boughton (2004) 123 Cal.App.4th 379, 389
[internal quotations omitted].) The
person receiving the benefit is required to make restitution “‘only if the
circumstances of its receipt or retention are such that, as between the two
persons, it is unjust for him to retain it.’” (Ghirardo v. Antonioli (1996) 14
Cal.4th 39, 51[internal citations omitted].)
“The term ‘benefit’ ‘denotes any form of advantage.’ Thus, a benefit is conferred not only when
one adds to the property of another, but also when one saves the other from
expense or loss.” (Ghirardo v.
Antonioli (1996) 14 Cal.4th 39, 51 [internal citations omitted].)
The FACC alleges World Oil unjustly retained the
benefit of $30,000.00 without fulfilling its obligation under the verbal
settlement agreement to not pursue legal action against Cross-Complainants
regarding the alleged breach of the Lease.
(FACC, ¶¶ 15, 52-53.) World Oil
offered this settlement agreement, and Cross-Complainants accepted the
settlement agreement on May 29, 2024. (FACC,
¶ 15.) World Oil then filed this case on
June 3, 2024, without disclosing the lawsuit’s existence to Cross-Complainants,
accepted the $30,000.00 payment on June 5, 2024, and failed to release Cross-Complainants
from any legal claims related to the breached Lease. (FACC, ¶¶ 15, 53.) As a result, Cross-Complainants suffer
significant detriment including loss of the $30,000.00 payment made in reliance
on the settlement agreement, incuring legal fees and costs defending this
action, business losses, reputational damage, and disruptions stemming from the
ongoing litigation. (FACC, ¶ 55.) The FACC sufficiently alleges World Oil
unjustly received and retained the benefit of the $30,000.00 initial payment
without fulfilling its obligations under the alleged settlement agreement.
Parties are generally allowed to plead in the
alternative and make inconsistent allegations.
(Mendoza v. Continental Sales Co. (2006) 140 Cal.App.4th 1395,
1402.) However, a plaintiff cannot
recover “on a quasi-contract claim if the parties have an enforceable agreement
regarding a particular subject matter.”
(Klein v. Chevron U.S.A., Inc. (2012) 202 Cal.App.4th 1342,
1388.) “Although a plaintiff may plead
inconsistent claims that allege both the existence of an enforceable
agreement and the absence of an enforceable agreement,” a plaintiff may not
plead both the existence of an enforceable contract and then deny the
contract’s existence in the same complaint.
(Id. at pp. 1389-1390; see Cal. Medical Ass’n v. Aetna U.S.
Healthcare of Cal. (2001) 94 Cal.App.4th 151, 170-174 [sustaining demurrer
to a quasi-contract claim where the complaint included references to contracts
covering the same subject matter as the quasi-contract claims].) Because the Court has determined the FACC
sufficiently alleges an enforceable contract and Cross-Complainants’
quasi-contract allegations explicitly state World Oil accepted the $30,000.00
under the verbal settlement agreements terms, this cause of action is not available.
Accordingly, the Court sustains World Oil’s demurrer
to the third cause of action.
Litigation Privilege - Fourth, Fifth,
Sixth, and Seventh Causes of Action
World Oil demurs to FACC’s causes of action for
fraudulent inducement, intentional misrepresentation, civil theft, and
conversion because of the litigation privilege.
These causes of actions are based upon alleged representations made by
World Oil’s representatives in connection with anticipated litigation and the
representations have a connection and logical relation to a contemplated
action—World Oil’s lawsuit based on Cross-Complainants’ breach of the Lease.
Cross-Complainants concede to World Oil’s argument
and to dismissing these causes of action with prejudice.
California’s litigation privilege applies to
communications with “some relation” to a judicial proceeding. (Rusheen v. Cohen (2006) 37 Cal.4th
1048, 1057; Rubin v. Green (1993) 4 Cal.4th 1187, 1193; Civ. Code, § 47,
subd. (b).) The privilege applies to
“publications which were private communications between parties and which
communications were related not only to actual but potential court
actions.” (Carden v. Getzoff
(1987) 190 Cal.App.3d 907, 913.) The
litigation privilege “immunizes defendants from virtually any tort liability
(including claims for fraud), with the sole exception of causes of action for
malicious prosecution.” (Graham-Sult
v. Clainos (9th Cir. 2014) 756 F.3d 724, 741 [citing Civ. Code, § 47, subd.
(b)].)
Because Cross-Complainants concede to this argument, the
Court sustains World Oil’s demurrer to the fourth, fifth, sixth, and seventh
causes of action.
Ninth Cause of Action: Declaratory Relief
World Oil demurs to the ninth cause of action for
failing to plead sufficient facts to support declaratory relief. World Oil demurs to the declaratory relief
cause of action arguing Cross-Complainants included the claim to seek redress
for past wrongs. Cross-Complainants’
issues are raised in the other causes action giving Cross-Complainants an
avenue for relief. There is no occasion
to define the respective rights of the party or make any declaration which
would govern the future conduct of the parties.
Cross-Complainants concede that their declaratory
relief cause of action may be dismissed without prejudice.
To plead declaratory relief, the complaint must
establish “(1) a proper subject of declaratory relief, and (2) an actual
controversy involving justiciable questions relating to the rights or
obligations of a party.” (Brownfield
v. Daniel Freeman Marina Hospital (1989) 208 Cal.App.3d 405, 410.) “The ‘actual controversy’ requirement
concerns the existence of present controversy relating to the
legal rights and duties of the respective parties pursuant to contract (Code
Civ. Proc., § 1060)[.]” (Ibid.)
Because Cross-Complainants concede to this argument, the
Court sustains World Oil’s demurrer to the ninth cause of action.
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.” (Code Civ. Proc., § 435.) A court may strike from the complaint any
irrelevant, false, or improper matter.
(Code Civ. Proc., § 436, subd. (a).)
The court may also “[s]trike out all or any part of any pleading not
drawn or filed in conformity with the laws of this state, a court rule, or an
order of the court.” (Code Civ. Proc., §
436, subd. (b).) A complaint must plead
ultimate facts to support punitive damages.
(Clauson v. Superior Court (1998) 67 Cal.App.4th 1253, 1255; Antelope
Valley Groundwater Cases 59 Cal.App.5th
241, 265 [“[T]he term ‘ultimate fact’ generally refers to a core fact,
such as an essential element of a claim.”].)
Prayer
for Relief: Attorney’s Fees
World Oil moves to strike attorney’s fees from the
FACC:
·
First Cause of Action: Breach of Contract
- ¶ 4
·
Second Cause of Action: Promissory
Estoppel - ¶ 4
·
Third Cause of Action: Restitution
(Quasi-Contract) - ¶ 4
·
Fourth Cause of Action: Fraudulent
Inducement - ¶ 5
·
Fifth Cause of Action: Intentional
Misrepresentation - ¶ 12
·
Seventh Cause of Action: Conversion - ¶ 4
·
Ninth Cause of Action: Declaratory Relief
- ¶ 6
World Oil argues the Court should strike the request
for attorney’s fees from the FACC because the FACC fails to allege an actual
contract that specifically provides for attorney’s fees. Cross-Complainants do not oppose.
Because the Court sustained the demurrer to the
third, fourth, fifth, seventh, and ninth causes of action, the Court addresses
only the first and second causes of action.
Attorney’s
fees are available when authorized by contract, statute, or law. (Code Civ.
Proc., § 1033.5, subd. (a)(10).)
The FACC does not allege facts establishing that World
Oil’s alleged settlement agreement and alleged promise to not sue included a
promise that authorized attorney fees for any breach of the promise. The FACC also fails to identify any legal or
statutory authority giving rise to attorney fees for promissory estoppel.
Accordingly, the Court strikes each request for
attorney’s fees from the FACC.
Punitive Damages
World Oil moves to strike punitive damages from the
FACC:
·
Paragraphs 29-30, 67, 69, 80, 100-101
·
Fourth Cause of Action: Fraudulent
Inducement - ¶ 4
·
Fifth Cause of Action: Intentional
Misrepresentation - ¶ 11
·
Seventh Cause of Action: Conversion - ¶ 3
World Oil argues the FACC fails to plead punitive
damages because the facts alleging oppression and malice arise from World Oil’s
alleged breach of the alleged settlement agreement. World Oil further argues that the FACC does
not allege facts showing World Oil’s managing agent directed or ratified the
alleged wrongful conduct. The FACC also
fails allege despicable conduct showing a conscious disregard or an evil
motive. Finally, the FACC fails to
allege punitive damages with specificity.
Cross-Complainants do not oppose.
To
state a prima facie claim for punitive damages, a complaint must set forth
specific facts demonstrating the elements stated in Civil Code section
3294. (College Hospital, Inc. v.
Superior Court (1994) 8 Cal.4th 704, 721; see also Brousseau v. Jarrett (1977)
73 Cal.App.3d 864, 872.) Malice is
“conduct intended by the defendant to cause injury to the plaintiff or
despicable conduct which is carried on by the defendant with a willful and
conscious disregard of the rights or safety of others.” (Id. at p. 725; Civ. Code, § 3294,
subd. (c)(1).)
Because the Court sustained World Oil’s demurrer to the
FACC’s fourth, fifth, sixth, and seventh causes of action and punitive damages
are not available for the remaining non-tortious claims, the issue of punitive
damages is moot.
Accordingly, the Court strikes all allegations for punitive
damages from the FACC.
Leave
to Amend
Leave to amend must be allowed where there is a
reasonable possibility of successful amendment. (Goodman v. Kennedy (1976) 18 Cal.3d
335, 348.) The burden is on the
plaintiff to show the court that a pleading can be amended successfully. (Ibid.; Lewis v. YouTube, LLC (2015)
244 Cal.App.4th 118, 226.)
It appears that Cross-Complainants could amend the
FACC to address the deficiencies in some of their claims. Accordingly, leave to amend is granted.
CONCLUSION
Cross-Defendant World Oil’s demurrer is sustained, in
part, for the Third and Ninth causes of action with leave to amend, and the
Fourth, Fifth, Sixth, and Seventh causes of action, without leave to
amend. Demurrer is overruled, in part,
for the First and Second causes of action.
Cross-Defendant World Oil’s motion to strike punitive
damages and attorney’s fees is granted, with leave to amend.
1.
Cross-Complainants MS Electrical and
Mahfoud are not granted leave to file and serve a second amended
cross-complaint within twenty (20) days of the date of this order.
Cross-Defendant World Oil to give notice.