Judge: Gregory Keosian, Case: 23STCV21849, Date: 2024-03-05 Tentative Ruling

Case Number: 23STCV21849    Hearing Date: March 5, 2024    Dept: 61

Defendant Home Times Group, Inc.’s Demurrer to the First Amended Complaint is SUSTAINED with 30 days leave to amend

Plaintiff 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) 39 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 Home Times Group, Inc. (Home) demurrers to each cause of action contained in Plaintiff Min Jiang’s (Plaintiff) First Amended Complaint (FAC). Defendant argues that since the causes of action are founded upon Defendant’s alleged acting as a broker for Plaintiff, a written contract is required under the statute of frauds. (Demurrer at p. 8.) Defendant further argues that the claims are barred by the statute of limitations, since Plaintiff had constructive notice of the transactions at issue by virtue of public documents (Demurrer at pp. 12–13.)

There is a three-year statute of limitations for “[a]n action for relief on the ground of fraud or mistake. The cause of action in that case is not deemed to have accrued until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake.” (Code Civ. Proc., § 338, subd. (d.)

The “discovery rule. . . postpones accrual of a cause of action until the plaintiff discovers, or has reason to discover, the cause of action.” (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 807.) “A plaintiff has reason to discover a cause of action when he or she ‘has reason at least to suspect a factual basis for its elements.’” (Ibid..) Courts “look to whether the plaintiffs have reason to at least suspect that a type of wrongdoing has injured them.” (Ibid.) The accrual of a cause of action in relation to the discovery rule is normally a question of fact. (Id. at p. 810.)

On a demurrer, the court must take as true statements such as that as plaintiff “did not discover, nor suspect, nor was there any means through which her reasonable diligence would have revealed, or through which she would have suspected,” the cause of an injury was the defendant in question. (Id. at p. 811.) However: “A plaintiff whose complaint shows on its face that his claim would be barred without the benefit of the discovery rule must specifically plead facts to show (1) the time and manner of discovery and (2) the inability to have made earlier discovery despite reasonable diligence.” (Id. at p. 808.) The burden is on the plaintiff to show diligence, and conclusory allegations will not withstand demurrer. (Ibid.)

Defendant’s arguments as to the statute of limitations are persuasive, in part. Plaintiff alleges that she paid more than $900,000 for the property at issue in 2013. (RAC ¶¶ 10, 13, Exh. 1.) She further alleges that, instead of transferring the property to her, it was transferred to her broker, Defendant Hua Guo (Guo) in October 2016 (FAC ¶ 14), and that its original owner used it as collateral for a loan in March 2017. (FAC ¶¶ 15–16.) Given the three-year limitations period applicable to Plaintiff’s fraud- and conversion-based causes of action, Plaintiff’s claims would have run at the latest by March 2020. However, Plaintiff filed the complaint on September 11, 2023, meaning the claims are time-barred without the benefit of the delayed-discovery rule. And Plaintiff does not specifically plead facts regarding her “inability to have made earlier discovery despite reasonable diligence.” (Fox, supra, 15 Cal. 4^th at p. 811.) Although Plaintiff argues that the existence of a fiduciary duty eliminates any duty of inquiry (Opposition at p. 6), the authorities cited for this point stand for the opposite position. (See Stella v. Asset Management Consultants, Inc. (2017) 8 Cal.App.5th 181, 197 fn. 13 [“While it is true a plaintiff's burden of discovery is reduced when he or she is in a fiduciary relationship with another individual, even assuming for the sake of argument that each of the respondents had a fiduciary duty to plaintiffs, this does not mean that plaintiffs had no duty of inquiry if they were put on notice of a breach of such duty.”].) The demurrer is therefore properly SUSTAINED to all claims.

Leave to amend is proper, however. Defendant argues that no relief under the delayed discovery rule is available because Plaintiff’s review of recorded documents associated with the transactions. (Demurrer at p. 7.) However, Defendant does not refer to the recorded documents in question, or indicate when this notice ought to have been conveyed. Moreover, the existence of public documents does not foreclose application of the delayed discovery rule to claims based on fraud. “Where fraud is involved, public records are not constructive notice of the true facts to the defrauded party.” (Gross v. Needham (1960) 184 Cal.App.2d 446, 460.)

Defendant’s arguments as to the sufficiency of the fraud allegations are also unpersuasive. The elements of fraud are: (1) misrepresentation (false representation, concealment, or nondisclosure); (2) knowledge of falsity (scienter); (3) intent to defraud or induce reliance; (4) justifiable reliance; and (5) damages.  (See Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.) It is well-established that “[t]o withstand a demurrer, the facts constituting every element of fraud must be alleged with particularity, and the claim cannot be salvaged by references to the general policy favoring the liberal construction of pleadings.” (Goldrich v. Natural Y Surgical Specialties, Inc. (1994) 25 Cal.App.4th 772, 782.) “This particularity requirement necessitates pleading facts which show how, when, where, to whom, and by what means the representations were tendered.” (Lazar, supra, 12 Cal.4th at p. 645 (internal quotation marks omitted).) Defendant argues that Plaintiff does not allege how Home knew the Plaintiff, or how they knew the representations were false. (Demurrer at p. 9.) But the FAC alleges that Defendant employed and supervised Guo when he misrepresented the value of the property to Plaintiff. (FAC ¶¶ 12, 24.) Defendant’s contention that it did not know of the transaction and that Guo’s actions were not within the scope of his employment are not facts contained in the pleadings, and are therefore not a suitable basis for demurrer.

Defendant’s argument from the statute of frauds also fails. Civil Code § 1624 indeed requires “[a]n agreement authorizing or employing an agent, broker, or any other person to purchase or sell real estate” to be in writing. (Civ. Code § 1624, subd. (a)(4).) But this restriction applies principally as a “consumer protection mechanism to protect real estate sellers and purchasers from the assertion of false claims by brokers for commissions,” and does not prohibit “an action by a principal against his or her broker to disgorge a commission already paid on the ground that the broker breached its fiduciary duty and obtained a secret profit.” (Westside Estate Agency, Inc. v. Randall (2016) 6 Cal.App.5th 317, 324–325.) Plaintiff’s claim here — that Guo and Prime pocketed the amount paid, and kept the land — is analogous.

The demurrer is therefore SUSTAINED with leave to amend as to all causes of action.