Judge Gregory Keosian, Case Number: 23STCV06083, Date: 2023-08-08 Tentative Ruling

Judge: Gregory Keosian, Case: 23STCV06083, Date: 2023-08-08 Tentative Ruling

Case Number: 23STCV06083 Hearing Date: August 8, 2023 Dept: 61

Defendant All Access Apparel, Inc.’s Demurrer and Motion to Strike Portions of the First Amended Complaint are OVERRULED and DENIED.

Plaintiffs to give 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.) In particular, as is relevant here, 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. [Citation.]”)

“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.)

Defendant All Access Apparel, Inc. (Defendant) demurrers to the third and fourth causes of action for account stated and open book account, the fifth cause of action for conversion, and the sixth cause of action for fraud. Defendant argues that the account claims are not supported by allegations that the parties have agreed to the amounts owed on the account, or that Plaintiff kept the requisite book account. (Demurrer at pp. 5–6.) Defendant argues that the conversion claim fails because it does not identify the amount owed, and arises only from a breach of contract, not an independent legal duty sufficient to establish tort liability. (Demurrer at p. 7.) Defendant finally argues that the fraud claim fails for lack of specificity or independently wrongful conduct. (Demurrer at pp. 8–9.)

Defendant’s arguments are uniformly unpersuasive.

An account stated is an agreement, based on prior transactions between the parties, that the items of an account are true and that the balance struck is due and owing. To be an account stated, it must appear that at the time of the statement an indebtedness from one party to the other existed, that a balance was then struck and agreed to be the correct sum owing from the debtor to the creditor, and that the debtor expressly or impliedly promised to pay to the creditor the amount thus determined to be owing.

(Leighton v. Forster (2017) 8 Cal.App.5th 467, 491, internal quotation marks omitted.) Although Defendant argues that the FAC contains no allegations that the parties agreed to the amounts owed, Plaintiff notes that the purchase orders listing the prices to be paid on each order originated from Defendant, meaning that the orders themselves constitute a record of agreement as to the prices to be paid. (FAC ¶ 16, Exh. 1.) Moreover, although Defendant argues that Plaintiff does not plead the existence of a “book account,” i.e. “a detailed statement which constitutes the principal record of one or more transactions between a debtor and a creditor arising out of a contract or some fiduciary relation, and shows the debits and credits in connection therewith” (Professional Collection Consultants v. Lujan (2018) 23 Cal.App.5th 685, 690–691), Plaintiff cites the record of more than 150 purchase orders and invoices between the parties, which include the agreed purchase price for the goods to be purchased. (FAC ¶ 16.) The demurrer is therefore OVERRULED as to both claims.

Defendant’s argument as to the conversion claim fares no better. Although it argues that the FAC is unclear with respect to what has been converted, there is no ambiguity: the FAC alleges that Defendants converted the $762,406.73 taken from Plaintiff by virtue of unlawful “charge-backs” of money alleged to have already been paid to Plaintiff. (FAC ¶¶ 33–36.) Although Defendant contends that these charge-backs amount only to a failure to pay under contract, and thus are not independent of the breach of contract claim, to embrace this argument would be to ignore the allegation that the amounts being charged back are from “monies already paid to Plaintiff.” (FAC ¶ 13(1).) This alleges, not merely the failure to pay amounts owed under a contract, but the conversion of funds in already Plaintiff’s possession and control. The demurrer is therefore OVERRULED as to the conversion claim.

This leaves Defendant’s arguments with respect to the fraud claim. 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.) Although Defendant contends that the FAC lacks this specificity (Demurrer at p. 8), this is not so, as the alleged misrepresentations are contained in the purchase order forms sent by Defendant to Plaintiff in the course of their business, one of which is attached to the Complaint as an exhibit. (FAC ¶ 10, Exh. 1.) Plaintiff alleges these order forms comprise a promise that Defendant could and would pay the amounts set forth therein for the goods indicated. (FAC ¶ 39.) The claim is thus recognizable as one for promissory fraud. (See Lazar, supra, 12 Cal.4^th at p. 638 [“An action for promissory fraud may lie where a defendant fraudulently induces the plaintiff to enter into a contract.”].) Defendant’s argument that the fraud claim is not independent of the contract fails as well, since the promises that form the basis for the fraud claim are alleged to have induced the contracts at issue. (See Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 990 [noting exception allowing tort damages in contract cases “where the contract was fraudulently induced.”].)

The demurrer is therefore OVERRULED.

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.)

Defendant moves to strike Plaintiff’s prayer for punitive damages, reasoning that it has not pleaded oppression, malice, or fraud. (Motion at pp. 5–6.)

Punitive damages are allowed in non-contract cases when a defendant is guilty of “oppression, fraud, or malice . . . .” (Civ. Code § 3294, subd. (a).) 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.(Civ. Code § 3294, subd. (c).) 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”).)Defendant’s argument is unpersuasive, as Plaintiff’s fraud claim has survived demurrer, and fraud is one of the bases upon which a plaintiff may seek punitive damages.

The Motion to Strike is therefore DENIED