Judge: Gregory Keosian, Case: 21STCV39315, Date: 2023-01-19 Tentative Ruling
Case Number: 21STCV39315 Hearing Date: January 19, 2023 Dept: 61
Defendants
Velur Enterprises, Inc. Velur Properties, LLC, Marylou Matienzo, and Dennis
Pilien’s Demurrer to the First Amended Complaint is SUSTAINED without leave to
amend as to the third cause of action for rescission, the fourth cause of
action for breach of fiduciary duty, and is otherwise OVERRULED.
The
Motion to Strike Portions of the First Amended Complaint is GRANTED without
leave to amend as to the second cause of action for negligent
misrepresentation.
Plaintiff
is directed to join as necessary parties Eric Gene Goduco, Ma Peciosa Goduco,
Odilon Aquino, Marinette C. Peterson, and Danilo S. Peralta.
Defendants to provide notice.
I.
DEMURRER
A demurrer should be sustained only where the defects appear
on the face of the pleading or are judicially noticed. (Code Civ. Pro., §§
430.30, et seq.) A court should
sustain a demurrer if a complaint does not allege facts that are legally
sufficient to constitute a cause of action. (See id. § 430.10,
subd. (e).) As the Supreme Court held in Blank
v. Kirwan (1985) Cal.3d 311: “We treat the demurrer as admitting all
material facts properly pleaded, but not contentions, deductions or conclusions
of fact or law. . . . Further, we give the complaint a reasonable interpretation,
reading it as a whole and its parts in their context.” (Id. at p. 318; see also Hahn. v. Mirda (2007) 147 Cal.App.4th
740, 747 (“A demurrer tests the pleadings alone and not the evidence or other
extrinsic matters. Therefore, it lies only where the defects appear on the face
of the pleading or are judicially noticed.”))
“In determining whether the complaint is sufficient as
against the demurrer … if on consideration of all the facts stated it appears
the plaintiff is entitled to any relief at the hands of the court against the
defendants the complaint will be held good although the facts may not be
clearly stated.” (Gressley v. Williams (1961) 193 Cal.App.2d 636, 639.)
“A demurrer
for uncertainty is strictly construed, even where a complaint is in some
respects uncertain, because ambiguities can be clarified under modern discovery
procedures.” (Khoury v. Maly’s of Cal., Inc. (1993) 14 Cal.App.4th 612,
616.) Such demurrers “are disfavored,
and are granted only if the pleading is so incomprehensible that a defendant
cannot reasonably respond.” (Mahan v.
Charles W. Chan Insurance Agency, Inc. (2017) 14 Cal.App.5th 841, 848.)
A
demurrer should not be sustained without leave to amend if the complaint,
liberally construed, can state a cause of action under any theory or if there
is a reasonable possibility the defect can be cured by amendment. (Schifando
v. City of Los Angeles, supra, 31 Cal.4th at p. 1081.) The demurrer also
may be sustained without leave to amend where the nature of the defects and
previous unsuccessful attempts to plead render it probable plaintiff cannot
state a cause of action. (Krawitz v. Rusch (1989) 209 Cal.App.3d 957,
967.)
Defendants
Velur Enterprises, Inc. Velur Properties, LLC, Marylou Matienzo, and Dennis
Pilien (Defendants) demurrer to each cause of action raised in Plaintiff Grace
Cherry’s (Plaintiff’s) First Amended Complaint (FAC). Defendants argue that
Plaintiff has failed to join necessary parties, who are signatories to
contracts she seeks to rescind. They argue that Plaintiff’s claims fall beyond
the statutes of limitations and beyond the reach of the delayed discovery rule.
They argue further that Plaintiff claims are ill-pleaded, and fail to allege
specific supporting facts or requisite elements.
A.
Necessary Parties
“In an action for rescission of a
contract,
all parties to the contract
are indispensable
to the action.” (Holder v. Home Sav. & Loan Ass'n of Los Angeles
(1968) 267 Cal.App.2d 91, 107.) Where a party is indispensable and not already joined,
“he court shall order that he be made a party.” (Code Civ. Proc. § 389,
subd. (a).)
Defendants note that for two of the four properties at
issue, Plaintiff was not the only party to the contract, but was joined by Eric
Gene Goduco, Ma Peciosa Goduco, Odilon Aquino, Marinette C. Peterson, and
Danilo S. Peralta. (Hlavacek Decl. Exhs. 1–4.) While this court possesses
discretion not to grant judicial notice to the terms of private contracts,
where, as here, the demurrer is unopposed and the plaintiff offers neither
objection to the taking of notice nor challenge to the authenticity of the
contracts, judicial notice may be taken under Evidence Code § 452. (Travelers
Indemnity Company of Connecticut v. Navigators Specialty Insurance Company
(2021) 70 Cal.App.5th 341, 354–355.)
Plaintiff here expressly seeks rescission of the contracts
at issue. (FAC ¶¶ 28–30, at p. 11.) Parties to a contract subject to rescission
are indispensable parties to the action in which rescission is sought. (Holder,
supra, 267 Cal.App.2d at p. 107.) Plaintiff is therefore directed to
join Eric Gene Goduco, Ma Peciosa Goduco, Odilon Aquino, Marinette C. Peterson,
and Danilo S. Peralta as parties to this action.
B.
Statute of Limitations
As in their previous
demurrer, Defendants argue that each cause of action is time-barred, as the
grant deeds indicate that the operative transactions took place at the earliest
on February 15, 2011, and at the latest on May 31, 2013. (RJN ¶¶ 2–5.) Assuming
this last date is the date of accrual for each cause of action, Plaintiff would
have had three years to bring a fraud claim or a derivative rescission claim
(Code Civ. Proc. § 338, subd. (d)), three years for breach of fiduciary duty
grounded in fraud (American Master Lease LLC v. Idanta Partners, Ltd.
(2014) 225 Cal.App.4th 1451, 1479), two years to bring a claim for violation of
broker’s duties (Civ. Code § 2079.4), and four years for a false advertising or
UCL claim. (Bus. & Prof. Code § 17208.) The longest limitations period
applicable to Plaintiff’s claims would have been four years, meaning the claims
would have to have been brought by May 31, 2017, to be timely. Here, the
Complaint was filed October 25, 2021, more than four years later. Thus, based
on judicially noticeable materials, Plaintiff’s claims are time-barred, without
the benefit of tolling doctrines.
This court previously
sustained the demurrer with leave to amend to address this defect, and
Plaintiff — after failing to offer amendment, then obtaining relief from
dismissal — has filed an FAC in an attempt to rectify that prior defect.
Plaintiff’s new FAC states that Defendants prevented Plaintiff from inquiring
into the real value of her properties by repeatedly urging her not to attempt
to sell the properties, and to wait for mail-in offers and solicitations from
more desperate buyers, which they assured her other nearby property owners were
receiving. (Proposed FAC ¶ 18.) Additionally, Plaintiff alleges that a
material part of the delay was the nature of the investment scheme offered by Defendants,
who sold Plaintiff on the lands by virtue of developments then planned, and
advised Plaintiff to “hold them [the properties] for several years, and then sell in the future when the areas
around them are/were developed.” (FAC ¶ 12.)
Defendants on demurrer
argue that Plaintiff may be charged with knowledge of the value of the
properties when she based her purchase on her own inspection. (Demurrer at p.
14, citing Heifetz v. Bell (1950) 101 Cal.App.2d 275, 277.) But the FAC
contains no averments of such independent inspection, save for one paragraph
stating that Plaintiff accompanied Defendants to a promotional tour of San
Bernardino, CA. (FAC ¶ 12.)
Accordingly, the statute
of limitations forms no basis to sustain the demurrer.
C.
Fraud / Negligent Misrepresentation
The elements of fraud are: (1)
misrepresentation or concealment, (2) knowledge of its falsity, (3) intent to
defraud, (4) justifiable reliance and (5) resulting damage. (Gil v. Bank of
America, Nat. Ass'n (2006) 138 Cal. App. 4th 1371, 1381; Barbara A.
v. John G. (1983) 145 C.A.3d 369, 376.)
Fraud causes of action must be pleaded with particularity,
meaning that the plaintiff must allege “how, when, where, to whom, and by what
means the representations were tendered.” (Lazar
v. Superior Court (1996) 12 Cal.4th 631, 645.) A plaintiff asserting fraud
against a corporate employer 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.” (Lazar,
supra, 12 Cal.4th at p. 631.)
The allegations here are reasonably specific. The main
actors were Defendants Marylou Matienzo and Dennis Pilen, who the FAC alleges
were sales agents for Defendants Velur Enterprises and Velur Properties. (FAC
¶¶ 5–6, 17.) It is alleged that Matienzo and Pilen used their long-term
friendly relationship with Plaintiff to sell her on the properties as the
behest of the Velur entities, offering her a variety of sales pitches and
“fraudulent marketing materials,” which falsely described the existence of
plans for industries, water supplies, and electricity to be brought in for
development of the properties. (FAC ¶ 12.) The FAC alleges other
representations made by Matienzo and Pilen, including the purchase of nearby
land by larger entities for further development. (FAC ¶¶ 12–13.) Plaintiff has
thus alleged fraud with requisite specificity.
The demurrer is therefore OVERRULED as to the first and
second causes of action for fraudulent and negligent misrepresentation.
D.
Rescission
Defendants argue that the third cause of action for
rescission of contract should be dismissed because rescission is not a cause of
action, but an equitable remedy. (Demurrer at p. 17.) Defendants’ argument is
supported by authority. (Nakash v. Superior Court (1987) 196 Cal.App.3d
59, 70 [“Rescission is not a cause of action; it is a
remedy.”].)
The
demurrer is SUSTAINED without leave to amend as to the third cause of action
for rescission.
E.
Professional
Negligence / Breach of Fiduciary and Statutory Duties
Defendants
argue that Plaintiff’s claims arising from purported breaches of broker’s
duties cannot proceed as no Defendant acted as an agent for Plaintiff.
(Demurrer at pp. 17–19.)
This is an accurate characterization of the FAC. Plaintiff
alleges that Defendants were brokers and agents, but not that they were her
brokers or agents. “A broker has a fiduciary duty to its client.” (Michel v.
Moore & Associates, Inc. (2007) 156 Cal.App.4th 756, 762.) Thus the
fourth cause of action for breach of fiduciary duty fails.
The absence of an agency relationship with Plaintiff does
not necessarily foreclose the other causes of action, however. “While real estate brokers owe their own
clients fiduciary
duties,
they owe
third parties who are not their clients, including the adverse party in a real
estate transaction, only those duties imposed by regulatory statutes.” (Saffie
v. Schmeling (2014) 224 Cal.App.4th 563, 568.) Likewise, “[a]lthough the
seller's agent does not generally owe a fiduciary duty to the buyer, he or she
nonetheless owes the buyer the affirmative duties of care, honesty, good faith,
fair dealing and disclosure, as reflected in Civil Code section 2079.16, as
well as such other nonfiduciary duties as are otherwise imposed by law.” (Holmes
v. Summer (2010) 188 Cal.App.4th 1510, 1528.) Thus the fact that Plaintiff
does not allege employment of Defendants does not foreclose the existence of
duties of care and good faith on Defendants’ part. And although Defendants
point to contractual language disclaiming reliance on outside representations,
such language does not bar claims founded upon such representations, or render
a plaintiff’s reliance on such represnetations unreasonable as a matter of law.
(See McClain v. Octagon Plaza, LLC (2008) 159 Cal.App.4th 784,
794.)
Although Defendants further argue that they are not
brokers, the FAC alleges that they are, and they cite to no judicially
noticeable matters contradicting that allegation. (FAC ¶ 36.)
Accordingly the demurrer is SUSTAINED as to the fourth
cause of action without leave to amend, and OVERRULED as to the fifth and sixth
causes of action.
F.
False
Advertising & Unfair Competition
Defendants argue that Plaintiff’s claims under Business
& Professions Code §§ 17200 and 17500 fail because Plaintiff alleges no
unlawful, unfair or fraudulent practices. (Demurrer at pp. 19–21.)
These arguments fail. “A business practice is fraudulent
under the UCL if a plaintiff can show that “members of the public are likely to
be deceived.” (Kaldenbach v. Mutual of Omaha Life Ins. Co. (2009) 178
Cal.App.4th 830, 847.) As described above, Plaintiff alleges that she was
recruited to invest in property by virtue of false representations and
marketing materials. Plaintiff has alleged fraudulent business practices.
Defendants argue that they cannot be liable for false
advertising or fraudulent business practices because of the disclaimer clause
and because of an additional “hold harmless” provision in the contracts.
(Demurrer at p. 21.) But as explained above, a contractual disclaimer will not
absolve a contracting party of liability for fraud. Moreover, the Unfair Competition
Law and False Advertising Law are statutes created for a public benefit, and
therefore are not subject to contractual waiver. (See McGill v. Citibank,
N.A. (2017) 2 Cal.5th 945, 961 [holding that an arbitration provision could
not waive an individual’s right to seek public injunctive relief under the
UCL].)
Defendants other arguments as to these claims are
unpersuasive. They argue that Plaintiff undertook a personal inspection of the
properties, and thus assumed responsibility, but do not cite any allegations or
judicially noticeable matters for this proposition. (Demurrer at p. 19.) They
argue that Plaintiff has failed to allege loss of money or property, but the
FAC alleges that Plaintiff expended money to purchase the property. (FAC ¶ 19.)
Defendants finally argue that Plaintiff cannot use a breach of contract as a
foundation for a UCL or false advertising claim, but the FAC does not allege a
breach of contract claim. (Demurrer at p. 20.)
The demurrer is therefore OVERRULED as to the seventh and
eighth causes of action.
Defendants finally argue that the FAC should be stricken
because it was filed beyond the 10-day timeline provided for in CRC Rule 3.1320
for leave to amend following demurrer. (Demurrer at pp. 21–22.) Yet the FAC was
not filed after leave to amend was granted following demurrer, but after
granting Plaintiff’s motion relief for dismissal.
II.
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(b)(1)). The notice of motion to strike a portion of a pleading shall quote
in full the portions sought to be stricken except where the motion is to strike
an entire paragraph, cause of action, count or defense. (California Rules of
Court Rule 3.1322.)
The grounds for a motion to
strike shall appear on the face of the challenged pleading or form any matter
of which the court is required to take judicial notice. (Code Civ. Proc., §
437(a)). The court then may strike out any irrelevant, false, or improper
matter inserted in any pleading and strike 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.) When the defect which justifies
striking a complaint is capable of cure, the court should allow leave to amend.
(Perlman v. Municipal Court (1979) 99
Cal.App.3d 568, 575.)
Velur argues that the prayer
for punitive damages should be stricken from the Complaint on the grounds that such
relief is unsupported by the allegations of fraud here. (Motion at pp. 6–8.)
Punitive damages are allowed in non-contract cases when a
defendant is guilty of “oppression, fraud, or malice . . . .” (Civ. Code §
3294.) The terms are defined as:
“Malice” means conduct which is 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.
“Oppression” means despicable conduct that subjects a person to
cruel and unjust hardship in conscious disregard of that person's rights.
“Fraud”
means 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.
Something more than the mere commission of a
tort is always required for punitive damages. (Taylor v. Superior Court (1979) 24 Cal.3d 890, 894.) Proof of negligence,
gross negligence, or recklessness is insufficient to warrant an award of
punitive damages. (Dawes v. Sup.Ct.
(Mardian) (1980) 111 Cal.App.3d 82, 88–89.) Punitive damages may be
recovered in an action for negligence or other nonintentional torts if the
plaintiff pleads and proves that the defendant acted with the state of mind
described as “conscious disregard” of the potential dangers to others. (Pfeifer v. John Crane, Inc. (2013) 220
Cal.App.4th 1270, 1299.) When malice is based on a defendant’s conscious
disregard of Plaintiff’s rights, the conduct must be both despicable and
willful. (College Hospital v. Superior
Court (1994) 8 Cal.4th 794, 713 (“College
Hospital”).)
Here, Plaintiff has rectified the failure of the original
complaint, and has pleaded the fraud cause of action with sufficient
specificity. As a fraud claim is alleged, punitive damages may be available
under Civil Code § 3294.
However, the claim for negligent
misrepresentation is properly stricken. “Following an order
sustaining a demurrer
or a motion for judgment on the pleadings with leave to amend, the plaintiff may amend his or
her complaint only as authorized by the court's order.” (Harris v. Wachovia Mortgage,
FSB (2010) 185 Cal.App.4th 1018, 1023.) This court did not grant leave to
assert a claim for negligent misrepresentation in sustaining the previous
demurrer, and such a claim was not in the proposed FAC that Plaintiff included
with her motion for relief from dismissal.
The motion to strike is therefore GRANTED as to the second
cause of action for negligent misrepresentation, without leave to amend.