Judge: H. Jay Ford, III, Case: 23SMCV04746, Date: 2024-02-01 Tentative Ruling

Case Number: 23SMCV04746    Hearing Date: February 1, 2024    Dept: O

Case Name:  Enamorado v. American Honda Motor Co., Inc., et al.

SUBJECT:                 DEMURRER WITH MOTION TO STRIKE

MOVING PARTY:   Defendant American Honda Motor Co., Inc.

RESP. PARTY:         Plaintiff Byron Enamorado

TENTATIVE RULING

            Defendant American Honda Motor Co., Inc.’s Demurrer is OVERRULED as to the Plaintiff Byron Enamorado’s 2^nd cause of action for fraudulent inducement – concealment. Defendant American Honda Motor Co., Inc.’s Motion to Strike Plaintiff Byron Enamorado’s prayer for punitive damages is DENIED. Plaintiff Byron Enamorado has successfully pleaded all the elements of a fraudulent concealment claim including specific facts to meet the heightened pleading requirement for fraud. The Court finds the economic loss rule does not bar the Plaintiff’s fraudulent inducement claim at the demurrer stage. Plaintiff Byron Enamorado has plead enough facts to allege fraudulent inducement against Defendant American Honda Motor Co., Inc. and thus punitive damages are appropriately plead.

I.                Demurrer

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.)

“[T]he elements of a cause of action for fraud based on concealment are: (1) the defendant must have concealed or suppressed a material fact, (2) the defendant must have been under a duty to disclose the fact to the plaintiff, (3) the defendant must have intentionally concealed or suppressed the fact with the intent to defraud the plaintiff, (4) the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact, and (5) as a result of the concealment or suppression of the fact, the plaintiff must have sustained damage.” (Bigler-Engler v. Breg, Inc. (2017) 7 Cal.App.5th 276, 310–311, citations omitted; see also CACI, 1901.)

“In transactions which do not involve fiduciary or confidential relations,” a duty to disclose the fact to the plaintiff “may arise in at least three instances: (1) the defendant makes representations but does not disclose facts which materially qualify the facts disclosed, or which render his disclosure likely to mislead; (2) the facts are known or accessible only to defendant, and defendant knows they are not known to or reasonably discoverable by the plaintiff; (3) the defendant actively conceals discovery from the plaintiff.” (Warner Constr. Corp. v. City of Los Angeles (1970) 2 Cal.3d 285, 294.)

“[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.)

Plaintiff Byron Enamorado (“Enamorado”) pleads with sufficient specificity that Defendants American Honda Motor Co., Inc. (“AHM”) concealed a material fact (Compl., ¶¶ 47–54.). That AHM had a duty to disclose the concealed fact to Enamorado. (Id., ¶¶19–46.) That AHM intentionally concealed or suppressed the fact with the intent to defraud Enamorado. (Id., ¶¶ 72, 73, 116, 124.) That Enamorado was unaware of the transmission issue and would not have purchased the vehicle had he known the concealed fact. (Id., ¶¶ 42, 58, 125, 129, 130.) And that Enamorado was damaged as a result of AHM’s alleged fraudulent concealment. (Id., ¶¶ 127– 131.)

Enamorado pleads that AHM “drafted, produced, and distributed marketing materials to the public containing factual representations about the Subject Vehicle enough specificity to reach the relaxed requirements for specificity,” thus pleading enough specificity to show AHM possessed the full information concerning the facts of the controversy. (Compl., ¶¶ 57–59; see Tarmann, supra, 2 Cal.App 4th at p. 157.)

Thus, the Court finds that Enamorado has successfully plead a cause of action for fraudulent inducement – concealment.

A.              Economic Loss Rule

“The economic loss rule requires a purchaser to recover in contract for purely economic loss due to disappointed expectations, unless he can demonstrate harm above and beyond a broken contractual promise.” (Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 988.) However, “[t]ort damages have been permitted in contract cases . . . where the contract was fraudulently induced.” (Id., at 989, citing Erlich v. Menezes (1999) 21 Cal.4th 543, 552.)

“Pending review and filing of the Supreme Court's opinion, unless otherwise ordered by the Supreme Court under (3), a published opinion of a Court of Appeal in the matter has no binding or precedential effect, and may be cited for potentially persuasive value only. Any citation to the Court of Appeal opinion must also note the grant of review and any subsequent action by the Supreme Court.” (Cal. Rules of Court, 8.1115.)

AHM argues that the economic loss rule applies since Enamorado did not allege that AHM breached any duty independent of the warranty, or that Enamorado suffered any independent tort loss other than economic loss. (Demurrer, p. 15.) Further, AHM argues that Dhital v. Nissan N. Am., Inc (2022) 84 Cal.App.5th 828, a case matching the specifics of the instant case and cited to by Enamorado, should not be followed because the case is currently under California Supreme Court review and thus is only persuasive authority (See Cal. Rules of Court, 8.1115.) Enamorado argues that California does not apply the economic loss rule to fraudulent inducement claims because “unlike tortious conduct in the performance of a contract, that fraudulent conduct is a violation of an independent duty that occurs before the contract is ever breached.” (Oppo., at p. 8.)

 The Court finds that even though Dithal is not binding authority, there is precedence for fraudulent inducement claims not being subject to the economic loss rule. (See Robinson Helicopter Co., Inc., supra, 34 Cal.4th at p. 991 [“We hold the economic loss rule does not bar Robinson's fraud and intentional misrepresentation claims because they were independent of Dana's breach of contract.”]; Erlich, supra, 21 Cal.4th at p. 552; County of Santa Clara v. Atlantic Richfield Co. (2006) 137 Cal.App.4th 292, 328 [“We believe that the California Supreme Court's decision in Robinson precludes the application of the economic loss rule to any intentional affirmative fraud action where the plaintiff can establish that the fraud exposed the plaintiff to liability.”].) Enamorado has properly pleaded a claim of fraudulent inducement, and all of Enamorado’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”].) Thus, the economic loss rule does not bar the 2^nd cause of action for fraudulent inducement – concealment at the demurrer stage.

            The Court finds that AHM’s Demurrer to the 2^nd cause of action is OVERRULED.

II.             Motion to Strike

“In an action for the breach of an obligation not arising from contract, where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice, the plaintiff, in addition to the actual damages, may recover damages for the sake of example and by way of punishing the defendant.” (Civ. Code, § 3294, subd., (a) emphasis added.) “With respect to a corporate employer, the advance knowledge and conscious disregard, authorization, ratification or act of oppression, fraud, or malice must be on the part of an officer, director, or managing agent of the corporation.” (Id., subd., (b).) (3) ‘”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.” (Id., subd., (c)(3).)

“[E]ven though certain language pleads ultimate facts or conclusions of law, such language when read in context with the facts alleged as to defendants' conduct may adequately plead the evil motive requisite to recovery of punitive damages.” (Monge v. Superior Ct., (1986)176 Cal. App. 3d 503, 510.) Furthermore, “[m]alice and oppression may be inferred from the circumstances of a defendant's conduct.” (Id., at p. 511.)

Enamorado has alleged sufficient specific facts to plead AHM committed a fraudulent inducement by concealment in an action separate from the contract. Enamorado has further pleaded sufficient facts to support a claim for punitive damages against AHM, a corporate entity, because the allegations include that AHM authorized or ratified the actions of corporate employees (Compl., ¶ 7.) Enamorado has alleged that AHM had knowledge of the Transmission Defect that is present in thousands of vehicles, including Enamorado’s, and chose to conceal the defect for years to the detriment of its consumers. (Compl., ¶¶ 11-40.)

Thus, the Court finds there are adequate grounds for punitive damages because allegations of fraud are properly pleaded. AHM’s Motion to Strike is DENIED.