Judge: H. Jay Ford, III, Case: 23SMCV01564, Date: 2024-07-16 Tentative Ruling

Case Number: 23SMCV01564    Hearing Date: July 16, 2024    Dept: O

  Case Name:  Beverly Hills Tower LLC, et al. v. The Little Door Corp., et al.

SUBJECT:                 DEMURRER TO THE FIRST AMENDENDED CROSS-COMPLAINT

MOVING PARTY:   Plaintiffs/Cross-Defendants Beverly Hills Tower and Shawn Far

RESP. PARTY:         Defendants/Cross-Complainants The Little Door Corp. and BRH Investments Limited.

TENTATIVE RULING

            Cross-Defendants Beverly Hills Tower and Shawn Far Demurrer to the 1^st and 2^nd causes of action in Cross-Complainants The Little Door Corp. and BRH Investments Limited’s Cross-Complaint is OVERRULED. Cross-Complainant alleges all the necessary facts with the requisite specificity for the Fraud and Negligent Misrepresentation causes of action within the FACC.

            Cross-Defendants Beverly Hills Tower and Shawn Far RJN is DENIED. (See Del E. Webb Corp. v. Structural Materials Co. (1981) 123 Cal.App.3d 593, 605 [“The hearing on demurrer may not be turned into a contested evidentiary hearing through the guise of having the court take judicial notice of affidavits, declarations, depositions, and other such material which was filed on behalf of the adverse party and which purports to contradict the allegations and contentions of the plaintiff.”].)

REASONING

            As a general matter, in a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) “A demurrer tests the pleading alone, and not the evidence or facts alleged.” (E-Fab, Inc. v. Accountants, Inc. Servs. (2007) 153 Cal.App.4th 1308, 1315.) As such, the court assumes the truth of the complaint’s properly pleaded or implied factual allegations. (Id.) The only issue a demurrer is concerned with is whether the complaint, as it stands, states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.)

            Where a demurrer is sustained, 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. (Id.; Lewis v. YouTube, LLC (2015) 244 Cal.App.4th 118, 226.) However, “[i]f there is any reasonable possibility that the plaintiff can state a good cause of action, it is error to sustain a demurrer without leave to amend.” (Youngman v. Nevada Irrigation Dist. (1969) 70 Cal.2d 240, 245).

            Plaintiff is only required to allege ultimate facts, not evidentiary facts. (See Committee on Children's Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 212 [“the complaint should set forth the ultimate facts constituting the cause of action, not the evidence by which plaintiff proposes to prove those facts”); 1 Cal. Affirmative Def. § 10:2 (2d ed.) [allegations of agency, course and scope of employment, etc. qualify as ultimate facts].) Plaintiff’s allegations must be accepted as true on demurrer. (See Yvanova v. New Century Mortgage Corp. (2016) 62 Cal.4th 919, 924 [“For purposes of reviewing a demurrer, we accept the truth of material facts properly pleaded in the operative complaint”].)

I.                Demurrer to the 1^st cause of action for Fraud and 2^nd cause of action for Negligent  Misrepresentation —OVERRULED

            "A complaint for fraud must allege the following elements: (1) a knowingly false representation by the defendant; (2) an intent to deceive or induce reliance; (3) justifiable reliance by the plaintiff; and (4) resulting damages. Every element must be specifically pleaded. [citations omitted]" (Service by Medallion, Inc. v. Clorox Co. (1996) 44 Cal.App.4th 1807, 1816.)

            “The elements of negligent misrepresentation are (1) the misrepresentation of a past or existing material fact, (2) without reasonable ground for believing it to be true, (3) with intent to induce another's reliance on the fact misrepresented, (4) justifiable reliance on the misrepresentation, and (5) resulting damage.” (Wells Fargo Bank, N.A. v. FSI, Financial Solutions, Inc. (2011) 196 Cal.App.4th 1559, 1573.)

“[T]he facts constituting the fraud must be alleged with sufficient specificity to allow defendant to understand fully the nature of the charge made.” (Roberts v. Ball, Hunt, Hart, Brown & Baerwitz (1976) 57 Cal.App.3d 104, 109.) Fraud actions against corporations require the plaintiff “to 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.” (Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157.) However, the specificity requirement is “relaxed when the allegations indicate that the defendant must necessarily possess full information concerning the facts of the controversy or when the facts lie more in the knowledge of the opposite party.” (Ibid., citations omitted.)

Cross-Defendants Beverly Hills Tower (“BH Tower”) and Shawn Far (“Far”) (collectively the “Cross-Defendants”) argue that Cross-Claimants The Little Door Corp. and BRH Investments Limited. (collectively the “Cross-Claimants”) did not plead enough facts to show reasonable, or justifiable, reliance within both the Fraud and Negligent Misrepresentation claims. (Demurrer, pp. 9–12.)  Cross-Defendants arguments regarding whether the specific facts stated in the FACC can be seen as reasonable reliance including whether a sophisticated businessman with relevant experience could not have reasonably relied on the stated representation, and no reasonable businessperson would have relied on the alleged representations, are both misplaced, and not appropriate at the demurrer stage. (See E-Fab, Inc., supra, 153 Cal.App.4th at p. 1315 [“A demurrer tests the pleading alone, and not the evidence or facts alleged.”].)

Cross-Claimants successfully plead reasonable reliance in the FACC by alleging the following:

1.     “The 20 feet of additional usable outdoor space was critical and a “but for” factor in Mr. Boumajdi’s decision to lease the ground floor space for his proposed restaurant, which would require substantial investment of time and money given it was not being used for a restaurant at the time. Mr. Boumajdi and Mr. Far discussed that Mr. Boumajdi would need to commit substantial time and financial resources to design, construct and build out a restaurant in Mr. Far’s space.” (FACC, ¶ 14.)

2.     “Mr. Boumajdi relied on Mr. Far’s representations about the extent of the outdoor space available for use as a restaurant seating area in agreeing to lease the ground floor and to invest time, money and energy to finance and build the ground floor space for the restaurant. But for the ability to use the outdoor space (Mr. Boumajdi’s plan and stated intention to Mr. Far was to have the majority of the restaurant’s seating outdoors), Mr. Boumajdi would not have agreed to lease this space, to work with Mr. Far on other lease matters or to spend hundreds of thousands of dollars on permitting, renovations and improvements to Mr. Far’s building. Had Mr. Boumajdi known that Mr. Far was aware that his representations to Mr. Boumajdi that the 20 foot space outside the building was usable for Mr. Boumajdi’s planned restaurant was not true, Mr. Boumajdi never would have agreed to lease the space.” (Id., ¶ 16.)

3.     “What Mr. Far and his agent Mr. Perez did not disclose, and the ground floor lease itself also did not disclose in writing (and indeed, the lease terms stated to the contrary), is that the ground floor leased area for the 499 N. Canon Drive property has two separate parcels. One parcel covered the building, and the separate parcel covered the outdoor space, and importantly here, the outdoor space could not be used as part of a restaurant with the indoor space leased to Mr. Boumajdi’s company TLD unless the two parcels were tied together. This revelation was a major defect in the benefit of the bargain that Mr. Boumajdi intended and negotiated. TLD and BRH are informed and believe that Mr. Far knew of this parcel issue before he leased the space to Mr. Boumajdi’s restaurant company, that he mispresented the ability to use the outdoor space as a restaurant along with the ground floor lease’s indoor space while negotiating with Mr. Boumajdi, and that Mr. Far has refused to tie the two parcels together. Mr. Far and his agent Mr. Perez knew that Mr. Boumajdi desired to use the outdoor space that was in the second parcel, and that such space was critical to Mr. Boumajdi’s decision to enter to into the ground floor lease, but Mr. Far concealed his knowledge of this material fact, which would not be known to Mr. Boumjadi and was information within Mr. Far’s exclusive knowledge and control.” (Id., ¶ 19.)

4.     “[I]in reliance on Mr. Far’s representations about the ability to use the ground floor space for Mr. Boumajdi’s desired purpose, Mr. Boumajdi dove head-first into this project, and expended substantial time, money and effort to do so, with the end result that Mr. Boumajdi’s businesses have paid Mr. Far approximately $1 million in rent, and expended hundreds of thousands more on improvements, permitting and design/build services, with no restaurant or profits to show for it.” (Id., ¶ 32.)

            Additionally, Cross-Defendants argument that the fraud claim fails because the claim is based on a prediction about future events is not persuasive. Cross-Defendants provide no authority to support this argument other than the case, Neu-Visions Sports, Inc. v. Soren/McAdam/Bartells (2000) 86 Cal.App.4th 303, which deals with a motion for summary judgment decided after extensive discovery and deposition, not the demurrer stage at issue here. Demurrers only deal with whether the pleadED facts state a cause of action, not whether there is a disputed issue of fact as in summary judgment motions. As stated above, the Cross-Claimants have stated specific facts to allege a cause of action for Fraud and Negligent Misrepresentation.

            Finally, Cross-Defendants argument that the fraud claims fails because it based on the legal opinion of a lay person. (See Harazim v. Lynam (1968) 267 Cal.App.2d 127, 131 [“The representations relied upon must ordinarily be affirmations of fact (Civ.Code, s 1710); misrepresentations of law or legal opinions expressed by laymen are insufficient.”].) This argument is also misplaced. The FACC alleges the Cross-Defendants knew the properties contained a defect, and that Cross-Defendants intentionally misrepresented, and hid, the known defect in order to gain Cross-Complainants reliance. (See FACC, ¶¶ 19, 24–26.) The FACC does not allege the existence of a lay person legal opinion to induced reliance, but instead includes allegations of factual representations made in order to induce Cross-Complainants into a lease. Thus, this argument is misplaced and inappropriate at the demurrer stage.

            Cross-Defendants Demurrer to the 1^st and 2^nd causes of action in the FACC is OVERRULED.