Judge: Gary I. Micon, Case: 24CHCV04740, Date: 2025-04-23 Tentative Ruling
Case Number: 24CHCV04740 Hearing Date: April 23, 2025 Dept: F43
Dept. F43
Date: 04-23-25
Case # 24CHCV04740, Lauent,
LLC, et al. v. Barron, Inc., et al.
Trial Date: None set.
DEMURRER AND MOTION
TO STRIKE
MOVING PARTY: Defendant Jane Barron, Inc.
RESPONDING PARTIES: Plaintiffs Lauent, LLC
and Lau Enterprises
RELIEF REQUESTED
Order sustaining demurrer to the first cause
of action and dismissing the first amended complaint against defendant with
prejudice. Order striking punitive
damages against defendant from the first amended complaint.
RULING: Demurrer
is overruled. Motion to strike is granted
with leave to amend.
SUMMARY OF ACTION
On December 23, 2024, plaintiffs Lauent, LLC
and Lau Enterprises (Plaintiffs) filed a complaint alleging breach of contract
and fraud - intentional misrepresentation.
On February 7, 2025, Plaintiffs filed a First Amended Complaint (FAC)
against defendants Jane Barron, Inc. (Defendant) and Jeff Abraham, alleging a
single cause of action for fraud - intentional misrepresentation and seeking $308,500.00
in compensatory damages and punitive damages.
The FAC alleges the following: Plaintiffs purchased an industrial facility
located at 9200 Gazette Avenue in Chatsworth, CA from Defendant. (FAC, ¶ 8.)
The parties executed a written purchase and sale agreement on December
10, 2021. (FAC, ¶ 9, Exh. A.) Defendant Abraham served as the seller’s
agent under the agreement. (FAC, ¶¶
8-9.) On December 30, 2021, before close
of escrow, the Plaintiffs’ agent emailed defendant Abraham stating that
Plaintiffs disapproved of the physical condition of the property, based on an inspection
report, which included an assessment of the dilapidated condition of the roof,
and requested a price reduction. (FAC, ¶
11.) On December 31, 2021, defendant
Abraham replied, rejecting the price reduction and representing that the
building was in working order and was properly maintained; that the roof,
although older, was constantly maintained by a licensed roofer; and that the
minor leaks would be fixed by a licensed roofer the following week on either
Tuesday or Thursday. (FAC, ¶ 12, Exh.
B.)
Plaintiffs allege that they relied on this
representation by waiving escrow contingencies, not obtaining an additional
roof inspection report, and proceeding with closing escrow on January 3,
2022. (FAC, ¶¶ 13, 28.)
In January 2023, Plaintiffs asked defendant
Abraham for the licensed roofer’s contact information. (FAC, ¶ 15.)
In December 2023, a dispute arose between Plaintiffs and Defendants when
Plaintiffs discovered severe leaking and water damage to the property due to
the roof’s dilapidated condition. (FAC,
¶ 16.) In February 2024, Plaintiffs
again asked for licensed roofer’s contact information as represented in
Abraham’s December 31, 2021 email, and for copies of the maintenance records
for the roof. (FAC, ¶ 17.) On November 1, 2024, Plaintiffs obtained a
roof inspection report by A-1 All American Roofing Co. Inc. which recommended a
total roof replacement at an estimated cost of $308,500.00. (FAC, ¶ 18.)
On February 5, 2025, Defendant provided Plaintiffs with roof maintenance
records for the first time which showed that Defendant never took any measures
to maintain the roof between November 28, 2016 and January 4, 2022. (FAC, ¶ 19, Exh. C.)
Defendant demurs to the FAC’s only cause of
action and moves to strike punitive damages against it from the FAC. Plaintiffs filed oppositions, and Defendant
filed replies.
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).) Counsel met and
conferred via email on February 11, 2025, but the parties did not come to an
agreement. (Declaration of Michele
Seltzer, ¶ 4, Exh. 2.)
The court finds that the meet and confer
efforts were not sufficient but elects to hear the demurrer and motion to
strike.
SUMMARY OF ARGUMENTS
Defendant asserts that the FAC fails to meet
the heightened pleading standard required for fraud claims. Plaintiffs allege that Defendant’s seller’s
agent misrepresented that the roof had been constantly maintained since
November 2016 while simultaneously incorporating roof repair records showing
that Defendant had paid a construction company for roof repairs on December 11,
2015; March 7, 2016; May 18, 2016; November 22, 2016; January 4, 2022; and
January 27, 2022. Further, the purchase
and sale agreement, which Plaintiffs also attached to the FAC, required
Plaintiffs to acknowledge that no representations concerning the property were
made by the brokers or relied on by Plaintiffs.
Further, defendant Abraham’s use of the term “constantly” is ambiguous at
best rather than a falsity. Finally,
Plaintiffs fail to demonstrate justifiable reliance because Plaintiffs admit they
had the property inspected before contacting defendant Abraham. Once Plaintiffs brought the roof issue to
defendant Abraham’s attention, defendant Abraham had the roof repaired on
Tuesday, January 4, 2022. Regarding the
motion to strike, the FAC’s punitive damages allegations are conclusory and do
not show malicious intent, intent to defraud, or despicable behavior.
Plaintiffs oppose, asserting that the FAC alleges
sufficient facts showing who, when, where, and by what means Defendant’s agent,
defendant Abraham, made misrepresentations about the roof being constantly maintained
by a licensed roofer. (FAC, ¶¶ 12-13,
21-25.) Plaintiffs also plead
justifiable reliance on defendant Abraham’s misrepresentations because the
terms of the purchase and sale agreement do not disclaim misrepresentations
made subsequent to the agreement’s signing.
The court should deny the motion to strike because the FAC alleges that
Defendant’s agent, acting within his authority as Defendant’s agent, acted with
malice, oppression, and conscious disregard for Plaintiffs’ rights by knowingly
making false representations through email to Plaintiffs about the roof’s
repair history. Defendant knew or should
have known the representations were false, that Plaintiffs would rely on the
representations, and that Plaintiffs would suffer damages.
Defendant responds that Plaintiffs fail to allege
that any misrepresentation was made about the roof’s condition. Plaintiffs’ opposition attempts to shift the
focus to the roof’s repair history.
However, the December 31, 2021 email made the roof’s condition and age
clear. Defendant cannot be held liable
for the disclosure of accessible or visible conditions. Plaintiffs admit they performed a thorough
inspection and that the inspection revealed the condition and deficiencies in
the building’s roof. The roof’s
condition was not a fact known only to Defendant or defendant Abraham. Plaintiffs’ exhibits negate the FAC’s
contradictory allegations. Section 12.2 of
the purchase and sale agreement contains an “as-is” provision. Longstanding
California law dictates that an “as-is” provisions put buyers on notice that
the seller makes no warranties about the quality or condition of the item song.
Plaintiffs still fail to allege malice
or intent to defraud.
ANALYSIS
Demurrer
A party may respond to a pleading against it by demurrer
based on one or more 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: Fraud – Intentional Misrepresentation
Defendant argues that the FAC fails to allege facts
sufficient to constitute fraud - intentional misrepresentation and is
uncertain.
The elements of a fraud - intentional
misrepresentation cause of action are (1) misrepresentation, (2) knowledge of
falsity, (3) intent to induce reliance on the misrepresentation, (4)
justifiable reliance on the misrepresentation, and (5) resulting damages. (City of Pomona v. Superior Court (2001)
89 Cal.App.4th 793, 803; Lazar v. Superior Court (1996) 12 Cal.4th 631,
638.) Fraud claims must be pled with
specificity; general and conclusory allegations do not suffice. (Lazar, supra, 12 Cal.4th at p.
645.) The complaint must plead facts
showing “how, when, where, to whom, and
by what means the representations were tendered.” (Ibid.) The facts must be clear enough to inform the
opposing party what he must answer. (See
Scafidi v. Western Loan & Building Co. (1946) 72 Cal.App.2d 550,
558.)
Plaintiffs allege that they learned about the roof’s
dilapidated condition from an inspection report. (FAC, ¶ 11.)
Plaintiffs subsequently asked Defendant’s agent, broker defendant
Abraham, for a price reduction based on the roof’s condition. (FAC, ¶ 12.)
In response, Defendant’s agent emailed Plaintiffs on December 31, 2021, rejecting
the price reduction and stated that “[t]he roof is older,” “has been maintained
constantly by a licensed roofer,” and that “[w]ith all of the rain in recent
weeks there are some minor leaks, which will be fixed by the same licensed
roofer next week either Tuesday or Thursday.”
(FAC, ¶ 12, Exh. B, pp. 1-2.)
Defendant’s roof repair records reflect that the subsequent repairs
occurred as evidence through two roof repair payments on Tuesday, January 4,
2022 and Thursday, January 27, 2022.
(FAC, Exh. C, p. 3.) Defendant’s
agent also affirmatively represented that the roof is “older.”
However, Plaintiffs correctly point out that Defendant’s
agent misrepresented how often the roof was maintained. Defendant’s repair records identify five
(5) instances when the roof was repaired: December 11, 2015, March 7, 2016,
November 22-28, 2016, January 4, 2022, and January 27, 2022. (Exh. C, pp. 1-3.) It appears that prior to Plaintiffs’ December
30, 2021 email, no roofing repairs had occurred since November 2016.
Defendant contends that defendant Abraham’s use of the
term “constantly” is puffing rather than a false statement of fact, and that
the term is ambiguous rather than intentional.
Statements of opinion are “puffing” and cannot be used to hold a
defendant liable for fraud. (See Hauter
v. Zogarts (1975) 14 Cal.3d 104, 111; see also Consumer Advocates v.
Echostar Satellite Corp. (2003) 1113 Cal.App.4th 1351, 1361 [holding
statements such as “crystal clear” and “CD quality” are “boasts” and
“all-but-meaningless superlatives” on which no reasonable consumer would rely
when viewing an advertising slogan]. But see Continental Airlines, Inc. v.
McDonnell Douglas Corp. (1989) 216 Cal.App.3d 388, 424 [finding representations
that include “promises of safety” are representations of fact].)
Here, the repair records attached to the FAC contain
facts directly contradicting defendant Abraham’s representation. (FAC, Exh. C.) Defendant Abraham’s representation that the
roof was constantly maintained by a licensed roofer were statements of fact
which Plaintiffs could not reasonably dispute at the time before closing escrow
because Plaintiffs did not have access to the repair records. More importantly, the repair records show
that the roof was last repaired five (5) years prior to the parties executing
the purchase and sale agreement. Therefore,
these records show facts which directly contradict defendant Abraham’s
statements about constant maintenance.
Next, Defendant contends that the purchase and sale
agreement contains an “as-is” provision that put Plaintiffs on notice of the property’s
condition and that Defendant gave no warranties.
The provision reads:
12.2
Buyer hereby acknowledges that, except as otherwise stated in this Agreement,
Buyer is purchasing the Property in its existing condition and will, by the time
called for herein, make or have waived all inspections of the Property Buyer
believes are necessary to protect its own interest in, and its contemplated use
of, the Property. The Parties acknowledge that, except as otherwise stated in
this Agreement, no representations, inducements, promises, agreements,
assurances, oral or written, concerning the Property, or any aspect of the
occupational safety and health laws, Hazardous Substance laws, or any other
act, ordinance or law, have been made by either Party or Brokers, or relied
upon by either Party hereto.
(FAC, Exh. A , p. 6.)
Plaintiffs argue that this provision is irrelevant
because Plaintiffs base their complaint on a misrepresentation that occurred
after the purchase and sale agreement was executed.
The court finds that Section 12.2 refers to any
representations that occurred or were relied on in executing the purchase and
sale agreement. “When a party learns
that he has been defrauded, he may, instead of rescinding, elect to stand on
the contract and sue for damages, and, in such case his continued performance
of the agreement does not constitute a waiver of his action for damages.” (Jue v. Smiser (1994) 23 Cal.App.4th
312, 315 [quoting Bagdasarian v. Gragnon (1948) 31 Cal.2d 744,
750].) Here, Plaintiffs discovered the alleged
misrepresentation over a year after closing escrow. Because Plaintiffs base their claim on
misrepresentations made after executing the agreement, this argument fails.
Defendant also contends that its disclosure that the roof
was old and that the minor leaks were likely due to the recent rain, shifted
the burden to Plaintiffs to investigate the roofing issues.
Real estate brokers representing sellers have an
“affirmative duty to conduct a reasonably competent and diligent inspection of
the residential property listed for sale and to disclose to
prospective purchasers all facts materially affecting the value or desirability
of the property that such an investigation would reveal.” (See Easton v. Strassburger (1984) 152
Cal.App.3d 90, 102 [emphasis added].)
However, this duty does not apply to the sale of commercial real
estate. (Id. at p. 102 fn. 8; see
also Smith v. Rickard (1988) 205
Cal.App.3d 1354, 1360; Richman v. Hartley (2014) 224 Cal.App.4th 1182, 1192-93.)
Real estate brokers for sellers also have a duty to be
honest and truthful in their dealings to all parties in a transaction and to
refrain from fraudulent misrepresentations.
(See Ward v. Taggart (1959) 51 Cal.2d 736, 741-42; Nguyen v.
Scott (1988) 206 Cal.App.3d 725, 735-56; see also Bus. & Prof. Code, §§
10150, 10176.) Principal sellers of
property have a duty to reveal hidden and material facts concealed by their
agent and of which they had knowledge, and failure to disclose them constitutes
fraud. (Herzog v. Capital Co.
(1945) 27 Cal.2d 349, 353 [citing Civ. Code, § 1572, subd. (3)].)
Defendant Abraham is a real estate broker who represented
Defendant in the property sale. (FAC, ¶
9(c), (d).) Defendant Abraham
intentionally misrepresented the roof maintenance frequency so that Plaintiffs
would waive and approve contingencies and refrain from obtaining an additional
roof inspection report. (FAC, ¶ 27.) As the principal seller, these misrepresentations
are imputed to Defendant.
Because Plaintiffs had no reason to believe Defendant
lied about the roof maintenance, Plaintiffs relied on the representations and
waived and approved the contingencies in the purchase and sale agreement and
refrained from repairing the roof or obtaining an additional roof inspection
report upon the close of escrow. (FAC, ¶
28.) As a result, Plaintiffs sustained
compensatory damages of $308,500.00 in roof repairs. (FAC, ¶ 29.)
Plaintiffs did not discover the misrepresentations until they
did a second inspection in 2023 and received a copy of the roof’s maintenance
history on February 5, 2025. (FAC, ¶ 19,
Exh. C.)
Accordingly, Defendant’s demurrer to the First Cause of
Action is overruled.
Legal
Standard - 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 (2020) 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.”].)
Punitive
Damages
Defendant moves to strike Plaintiff’s request for
punitive damages concerning Defendant (FAC, ¶ 30; Prayer, paragraph 1.b) from
the FAC.
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
Hosp., 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).) Oppression is “despicable
conduct that subjects a person to cruel and unjust hardship in conscious
disregard of that person’s rights.”
(Civ. Code, § 3294, subd. (c)(2).)
Fraud is “an intentional misrepresentation, deceit, or concealment of a
material fact known to the defendant with the intention on the part of the
defendant of thereby depriving a person of property or legal rights or
otherwise causing injury.” (Civ. Code, §
3294, subd. (c)(3).) “Malice and
oppression may be inferred from the circumstances of a defendant’s
conduct.” (J. R. Norton Co. v.
General Teamsters, Warehousemen & Helpers Union, Local 890 (1989) 208
Cal.App.3d 430, 444.)
Punitive damages are not available for claims arising
from breach of contractual obligations.
(Civ. Code, § 3294, subd. (a); Cates Constructions, Inc. v. Talbot
Partners (1999) 21 Cal.4th 28, 61; Ginsberg v. Gamson (2012)
205 Cal.App.4th 873, 901.) Absent an
independent tort, contractual punitive damages are not awarded even if the
defendant’s conduct was willful, fraudulent, or malicious. (Myers Building Indus. Ltd. v. Interface
Technology, Inc. (1993) 13 Cal.App.4th 949, 959; see also Applied
Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 516; College
Hosp., Inc., supra, 8 Cal.4th 704, 725.)
“A corporation may be held liable for punitive damages
for the acts of its agents and employees when the act is motivated by actual
malice or done under circumstances amounting to oppression, providing that the
act is done with the knowledge or under the direction of corporate officials
having power to bind the corporation.” (J.
R. Norton Co., supra, 208 Cal.App.3d at p. 445.) A corporation may also be held liable for
punitive damages for the acts of specific agents or employees if the specific
agent was an officer, director other managing agent, acting on behalf of the
corporation. (CACI No. 3943.)
Although Plaintiffs sufficiently allege a fraud cause of
action against Defendant and that defendant Abraham maliciously made
misrepresentations with a disregard for Plaintiffs’ rights, Plaintiffs do not
sufficiently plead facts showing that any corporate officer with the discretion
to set corporate policy ratified or authorized defendant Abraham’s misrepresentations. The FAC merely states that each defendant’s
conduct was authorized and ratified by the other defendants.
Therefore, the court strikes the first amended
complaint’s punitive damages allegations (FAC, ¶ 30; Prayer,
paragraph 1.b) as to Defendant Jane Barron, Inc., with leave to amend.
CONCLUSION
Defendant Jane Barron, Inc.’s demurrer to the First
Amended Complaint’s First Cause of Action is overruled.
Defendant Jane Barron, Inc.’s motion to strike punitive
damages against defendant Jane Barron from the First Amended Complaint is
granted with leave to amend. The
court strikes the following from the First Amended Complaint: Paragraph 30; Prayer
for Relief, paragraph 1.b.
Plaintiffs may file an amended complaint within thirty
(30) days of this order.
Defendant Jane Barron, Inc. to give notice.