Judge: Helen Zukin, Case: 21SMCV01179, Date: 2022-12-16 Tentative Ruling

Case Number: 21SMCV01179    Hearing Date: December 16, 2022    Dept: 207

Background

This action stems from remodeling work performed at the residence owned by Plaintiffs Francine Fisher and Howard Fisher (collectively “Plaintiffs”). Plaintiffs bring this action against Defendants Sterling West (“Sterling”) and Sterling Landscaping, Inc. (“Sterling Landscaping” or, collectively with Sterling, “Defendants”), as well as other individuals and entities alleging various defects and deficiencies in the remodeling of Plaintiffs’ backyard. Plaintiffs’ operative pleading is the Second Amended Complaint (“SAC”) filed on September 15, 2022, which alleges causes of action against Defendants for (1) breach of contract, (2) fraud, (3) negligence, (4) professional negligence, and (5) disgorgement under Business and Professions Code § 7159.

Defendants bring this demurrer to Plaintiffs’ cause of action for fraud asserted against them in the SAC, alleging the SAC fails to state sufficient facts to constitute a cause of action against them under Code Civ. Proc. § 430.10(e). Defendants also move to strike allegations in the SAC concerning Plaintiffs’ claim for punitive damages.

Demurrer Standard

When considering demurrers, courts read the allegations liberally and in context. (Wilson v. Transit Authority of City of Sacramento (1962) 199 Cal.App.2d 716, 720-21.) 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 on 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.) However, it does not accept as true deductions, contentions, or conclusions of law or fact. (Stonehouse Homes LLC v. City of Sierra Madre (2008) 167 Cal.App.4th 531, 538.)

Motion to Strike Standard

The court may, upon a motion, or at any time in its discretion, and upon terms it deems proper, strike any irrelevant, false, or improper matter inserted in any pleading. (Code Civ. Proc., § 436(a).) The court may also strike 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. (Id., § 436(b).) The grounds for a motion to strike are: the pleading has irrelevant, false, or improper matter, or has not been drawn or filed in conformity with laws. (Id. § 436.) The grounds for moving to strike must appear on the face of the pleading or by way of judicial notice. (Id. § 437.)

Analysis

            1.         Meet and Confer Requirement

The Court finds Defendants have complied with the meet and confer requirements set forth under Code of Civil Procedure §§ 430.41 and 435.5. (An Decl. at ¶4 [demurrer]; An Decl. at ¶6 [motion to strike].)

            2.         Third Cause of Action – Fraud

“The elements of fraud are (a) a misrepresentation (false representation, concealment, or nondisclosure); (b) scienter or knowledge of its falsity; (c) intent to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Hinesley v. Oakshade Town Ctr. (2005) 135 Cal.App.4th 289, 294.) The facts constituting the alleged fraud must be alleged factually and specifically as to every element of fraud, as the policy of “liberal construction” of the pleadings will not ordinarily be invoked. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.) To properly allege fraud against a corporation, the plaintiffs must plead the names of the persons allegedly making the false 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.)

Defendants argue Plaintiffs’ fraud claim is not pled with the requisite level of specificity. In sustaining Defendants’ prior demurrer to the cause of action for fraud, the Court found the First Amended Complaint had merely stated in conclusory fashion “At the time that Sterling/Sterling-L, Karri and Derian made the statement and took the actions as set forth herein, they knew that said statements were not true, and were in fact were [sic] false, and they took such actions with the intent to deceive Plaintiff.” (FAC at ¶76.) The Court held this was insufficient to establish the essential elements of a fraud claim.

The cause of action for fraud alleged in the SAC is based on alleged misrepresentations and concealment set forth at “Paragraphs 12, 15, 17, 18, 21, 24, 27, 28, 34, 41, 44, 48-55, 58, and 64” of the SAC. (SAC at ¶92.) Paragraphs 18, 41, 44, and 48-50 do not contain any allegations regarding Defendants. The remaining paragraphs contain the following allegations as to Defendants:

·                     Paragraph 12 alleges Defendant Sterling failed to disclose to Plaintiffs that Defendants McCoy and Derian would be supervising the project. Paragraph 17 similarly alleges Sterling misrepresented to Plaintiffs that he would oversee and manage the project. These allegations are reiterated in paragraph 64.

·                     Paragraph 15 alleges Sterling failed to disclose that Sterling Landscaping had “lost several of its key staff due to various personal and financial issues.” Paragraph 58 makes similar allegations regarding Sterling’s ability to complete projects.

·                     Paragraph 21 restates the same misrepresentations and concealment alleged in paragraphs 12, 15, and 17.

·                     Paragraph 24.C. alleges Sterling misrepresented the cost of replacement bulbs for the lighting system used on the project.

·                     Paragraphs 27 and 28 allege Sterling misrepresented the type of irrigation system which would be installed.

·                     Paragraph 34 alleges Defendants removed conduit and wiring from Plaintiffs’ property and concealed this removal from Plaintiffs.

·                     Paragraphs 51 and 52 claims “Kerri/Sterling” falsely represented how often the material used for decks on the project would need to be maintained and concealed defects in material.

·                     Paragraph 53 asserts “Kerri/Sterling” did not advise Plaintiffs “that the first step into the pool and the Jacuzzi [sic] would be between 3-4 inches deeper due to the thickness of the new deck.”

·                     Paragraph 54 claims “Kerri/Sterling” did not disclose to Plaintiffs “that the first step from the front walk was not the same rise as the other steps.”

·                     Paragraph 55 alleges the system installed for remotely accessing the pool equipment did not work correctly.

The Court finds the SAC has corrected the deficiency identified in its order on Defendants’ prior demurrer. For example, in paragraph 17 Plaintiffs claim Sterling falsely represented to Plaintiffs that he would oversee and manage the project, that he knew this representation was false when he made it, and he made the statement “to induce the Plaintiffs to engage him for the Project.” (SAC at ¶17.) Plaintiffs allege this representation was made in December 2018 and it was made by Sterling as the president and sole shareholder of Sterling Landscaping with the “authority to bind the corporation.” (SAC at ¶¶17, 87.) The Court finds these allegations are sufficient to state a cause of action against Defendants for fraud.

“A demurrer must dispose of an entire cause of action to be sustained.” (Poizner v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 119; see also Daniels v. Select Portfolio Servicing. Inc. (2016) 246 Cal.App.4th 1150, 1167 [a demurrer cannot lie as to only part of a cause of action but can only be sustained as to an entire cause of action].) As the Court has determined the SAC sufficiently states a cause of action against Defendants for fraud stemming from the alleged misrepresentation as to who would be managing and overseeing the project, the Court need not examine whether the other alleged misrepresentations and concealment were sufficiently pled and declines to do so.

Accordingly, the Court OVERRULES Defendants’ demurrer to Plaintiffs’ cause of action for fraud.

            3.         Motion to Strike Allegations Concerning Punitive Damages

Defendants also move to strike allegations in the FAC concerning punitive damages, arguing the SAC does not sufficiently allege Defendants acted with oppression, fraud, or malice such as to justify an award of punitive damages under Civil Code § 3294. As set forth above, the Court has determined Plaintiffs have sufficiently alleged Defendants acted with fraud and thus same result follows with respect to Defendants’ motion to strike. Accordingly, Defendants’ motion to strike is DENIED.

Conclusion

Defendants’ demurrer to the third cause of action for fraud is OVERRULED. Defendants’ motion to strike allegations in the FAC concerning punitive damages is DENIED.