Judge: Helen Zukin, Case: 21SMCV01621, Date: 2023-06-29 Tentative Ruling
Case Number: 21SMCV01621 Hearing Date: June 29, 2023 Dept: 207
Background
This case concerns the purchase and sale of real property
located at 9221 Charlieville Blvd., Beverly Hills, California 90210. Plaintiff,
purchaser JJK Enterprises LLC (“JJK”) filed a Complaint seeking specific
performance of its purchase agreement with seller, defendant Charlieville View,
LLC. Charlieville View, LLC (“Cross-Complainant”) filed a Cross-Complaint
against JJK, and Cross-Defendants David Shaaya and Continental Real Estate
Services, Inc. (Shaaya and Continental collectively “Cross-Defendants”)
seeking, among other things, to invalidate the purchase agreement.
On November 29, 2022, Cross-Complainant filed a First
Amended Cross-Complaint (“FACC”) asserting causes of action for breach of
fiduciary duty, fraud, negligence, negligent misrepresentation, and
constructive fraud. On March 20, 2023, the Court sustained Cross-Defendants’ demurrer
with leave to amend as to Cross-Complainant’s fraud cause of action and
overruled the rest of the demurrer.
On April 20, 2023, Cross-Complainant filed the operative
Second Amended Cross-Complaint (“SACC”), asserting ten causes of action: (1)
breach of fiduciary duty and enhanced damages under Probate Code section 859
against Cross-Defendants; (2) breach of fiduciary duty against Cross-Defendants;
(3) fraud against JJK and Cross-Defendants; (4) fraud based rescission against
JJK; (5) negligent misrepresentation against JJK and Cross-Defendants; (6)
concealment against JJK and Cross-Defendants; (7) unlawful, unfair, or
fraudulent business act or practice under Business and Professions Code section
17200 against Cross-Defendants; (8) breach of implied covenant of good faith
and fair dealing against JJK and Cross-Defendants; (9) fraud in execution
against Cross-Defendants; and (10) constructive fraud against Cross- Defendants.
JJK brings a demurrer as to the third and fourth claims for
fraud and fraud based on recission, fifth claim for negligent misrepresentation,
sixth claim for concealment, and eighth claim for breach of the implied
covenant of good faith and fair dealing under Code of Civil Procedure section
430.10(e) and (f). Cross-Defendants demur to the first claim for breach of
fiduciary duty and enhanced damages, third claim for fraud, sixth claim for
concealment, and ninth claim for fraud in execution under Code of Civil
Procedure section 430.10(e)
JJK also filed a motion to strike the fourth claim for fraud
based on recission, sixth claim for concealment, and eighth claim for breach of
the implied covenant under Code of Civil Procedure sections 435 and 436. Cross-Defendants
move to strike the first claim for breach of fiduciary duty with enhanced
damages, sixth claim for concealment, seventh claim for violation of Business
and Professions Code section 17200, eighth claim for breach of the implied
covenant of good faith and fair dealing, and ninth claim for fraud in
execution. Cross-Complainant opposes the demurrers and motions to strike. As
the demurrers and motions to strike challenge the same pleading, the Court will
discuss them together in one tentative ruling.
Legal Standard
Motion to Strike
Demurrer
A demurrer tests the sufficiency of
whether the complaint states a cause of action. (Hahn v. Mirda (2007)
147 Cal.App.4th 740, 747.) When considering demurrers, courts read the
allegations liberally and any 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 pleadings alone and not
the evidence or other extrinsic matters. (SKF Farms v. Superior Court (1984)
153 Cal. App. 3d 902, 905.) Therefore, it lies only where the defects
appear on the face of the pleading or are judicially noticed. (CCP §§
430.30, 430.70.) The only issue a demurrer is concerned with is whether
the complaint, as it stands, states a cause of action. (Hahn,
supra, 147 Cal.App.4th at 747.)
Meet and Confer Requirement
The Court notes that counsel for Cross-Defendants did not meet and
confer telephonically or in person before filing their demurrer and motion to
strike, contrary to Code of Civil Procedure sections 430.41(a) and 435.5(a).
While the Court may not overrule a demurrer or deny a motion to strike for
failure to adequately meet and confer, (CCP §§ 430.41(a)(4) and 435.5(a)(4)),
the Court admonishes counsel for Cross-Defendants to comply with the
requirements for such motions going forward.
Analysis – Motion to Strike (JJK)
“Absent
prior leave of court, an amended complaint raising totally new and different causes of action may be
subject to a motion to strike under CCP § 436(b).” (A. Demurrers, Cal. Prac. Guide Civ.
Pro. Before Trial Ch. 7(I)-A, [italics in original]; see also Patrick v.
Alacer Corp. (2008) 167 Cal.App.4th 995, 1015 [a demurrer sustained with
leave to amend only permits amendment to causes of action to which the demurrer
was sustained, not add new causes of action].) A new cause of action may be
added following a demurrer when it directly responds to the court’s reasoning
for sustaining the demurrer. (Id.)
The FACC
only pled five causes of action. The Court sustained the demurrer to the FACC
only as to the fraud cause of action on the grounds that it failed to plead
fraud with the requisite specificity. (Minute Order (3/20/2023), pp. 4-5.) The
SACC now alleges ten causes of action, adding another type of breach of
fiduciary duty claim under Probate Code section 859, two additional fraud type
claims, an unfair competition claim, and a claim for breach of the implied
covenant of good faith and fair dealing. The Court rejects Cross-Complainant’s
contention that these new causes of action directly correspond with the Court’s
sustaining of the demurrer. Adding these causes of action does not, in any way,
help Cross-Complainant satisfy the particularity pleading requirement for its
fraud claim. Cross-Complainant improperly added these causes of action without
previously obtaining leave of the Court. (See Patrick, supra, 167
Cal.App.4th at p. 1015.)
Accordingly,
the Court will grant JJK’s motion to strike the fourth, sixth, and eighth causes
of action against it (fraud based on recission, concealment, and breach of the
implied covenant of good faith and fair dealing, respectively), without leave
to amend.
Analysis
– Demurrer (JJK)
In light of the Court’s ruling on JJK’s motion to strike, the only
remaining causes of action to be addressed the third cause of action for fraud
and the fifth cause of action for negligent misrepresentation.
Fraud
“The elements of fraud,”
including a cause of action for fraudulent inducement, “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.)
The Court finds again that
Cross-Complainant’s SACC still fails to satisfy the specificity requirements
for a fraud claim. The SACC provides no dates for when any alleged
misrepresentations occurred, whether such misrepresentations were made orally
or in writing, the capacity of the person allegedly making the
misrepresentation to act on behalf of a corporate entity like JJK, or to whom
the alleged misrepresentations were made. The SACC does not even differentiate
between which of the three cross-defendants purportedly did what in this
matter, but instead lumps them all together. (See, e.g., SACC, ¶¶ 26, 32, 48,
53-55, 57-59, 61-63, 65-69, 74-76, 79-82, 85, 91-92, 94-96.) The SACC’s fraud
allegations are conclusory and insufficiently supported by any factual
allegations contained therein. Additionally, Cross-Complainant has had multiple
opportunities to correct these defects but has still failed to do so.
Accordingly, the Court will
sustain JJK’s demurrer without leave to amend as to the fraud claim.
Negligent
Misrepresentation
“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.” (Nat'l Union Fire Ins. Co. of
Pittsburgh, PA v. Cambridge Integrated Servs. Grp., Inc. (2009) 171
Cal.App.4th 35, 50.) Negligent misrepresentation requires an affirmative
misrepresentation and not an omission. (Lopez v. Nissan of North America,
Inc. (2011) 201 Cal.App.4th 572, 596.)
The SACC fails to allege any affirmative
misrepresentations by JJK, let alone who made any misrepresentations on behalf
of JJK and the capacity they purportedly had to make such statements. The Court
further agrees with JJK that the SACC lacks allegations that JJK authorized or
ratified any such misrepresentations on its behalf. (See Civ. Code § 2339.)
Accordingly, the Court will sustain JJK’s demurrer
without leave to amend as to the negligent misrepresentation claim.
Analysis – Motion to Strike (Cross-Defendants)
With respect to Cross-Defendants’ motion to strike the first
claim for breach of fiduciary duty with enhanced damages, sixth claim for
concealment, seventh claim for violation of Business and Professions Code
section 17200, eighth claim for breach of the implied covenant of good faith
and fair dealing, and ninth claim for fraud in execution, the analysis here is the same regarding the improperly pled
additional causes of action. These additional causes of action do not solve the
problem of Cross-Complainant failing to plead fraud with the requisite
specificity in the FACC. It is unclear how an additional cause of action for
breach of fiduciary duty under Probate Code section 859 corresponds with the
Court’s ruling on the previous demurrer to the FACC. The sixth and ninth cause
of action are just variations on a fraud claim. The unlawful competition 17200 claim
also does nothing to satisfy the requisite specificity for pleading a fraud
claim. The breach of the implied covenant of good faith and fair dealing also
does nothing to address this problem.
Accordingly, the Court will grant Cross-Defendants’ motion to
strike as to the first, sixth, seventh, eighth, and ninth causes of action
without leave to amend.
Analysis
– Demurrer (Cross-Defendants)
With respect to Cross-Defendants’
demurrer, the only remaining cause of action to address is the fraud claim.
This cause of action again fails for the same reasons set forth above in JJK’s
demurrer. The SACC still lacks the requisite specificity to plead a fraud claim.
Additionally, Cross-Complainant has had multiple opportunities to address these
defects but has failed to do so.
Therefore, the Court will sustain
the demurrer without leave to amend as to the fraud cause of action in the
SACC.
Conclusion
The Court GRANTS JJK’s motion to strike the fourth, sixth,
and eighth causes of action in the SACC as to JJK, without leave to amend.
The Court SUSTAINS the demurrer as to the third and fifth
causes of action in the SACC as to JJK, without leave to amend.
The Court GRANTS Cross-Defendants’ motion to strike the
first, sixth, seventh, eighth, and ninth causes of action in the SACC as to
Shaaya and Continental, without leave to amend.
The Court SUSTAINS Cross-Defendants’ demurrer as to the
third cause of action in the SACC, without leave to amend.