Judge: Holly J. Fujie, Case: 23STCV00199, Date: 2023-08-10 Tentative Ruling

Case Number: 23STCV00199    Hearing Date: August 10, 2023    Dept: 56

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF LOS ANGELES - CENTRAL DISTRICT

MOVING PARTY: Plaintiff/Cross-Defendant David P. Goodlaw (“Goodlaw”)

RESPONDING PARTY: Defendant/Cross-Complainant Edward Paul Humenik (“Humenik”)

The Court has considered the moving, opposition and reply papers. 

BACKGROUND

This action arises out of a dispute concerning the purchase of real property (the “Property”).  Goodlaw’s complaint (the “Complaint”) alleges: (1) breach of contract; (2) violation of Civil Code section 2943; (3) quiet title to real property; (4) injunctive relief; (5) specific performance; (6) conversion; (7) trespass to chattels; (8) claim and delivery; and (9) declaratory relief.

Humenik’s currently operative first amended cross-complaint (the “FAXC”) alleges: (1) rescission of contract; and (2) common count.

In relevant part, the FAXC alleges: On or about December 4, 2013, Goodlaw and Humenik entered into a California Residential Purchase Agreement and Joint Escrow Instructions (the “Agreement”), pursuant to which Humenik agreed to sell the Property to Goodlaw.  (FAXC ¶ 43 Exhibit A.)  A grant deed transferring the Property to Goodlaw was recorded on December 31, 2013.  (FAXC ¶ 6.) 

Goodlaw and Humenik first met while Humenik was Goodlaw’s student in a night school program located in the Burbank Unified School District.  (FAXC ¶¶ 10-11.)  During the years of their relationship, Goodlaw became a trusted friend and advisor to Humenik and acquired knowledge about Humenik’s life.  (FAXC ¶ 13.)  Goodlaw was also a sophisticated real estate investor and director of the credit union to which Humenik belonged (the “Credit Union”).  (See FAXC ¶¶ 14-15.) 

Shortly after the reappearance and subsequent death of his long-estranged father, Humenik inherited the Property.  (See FAXC ¶¶ 23-28.)  Goodlaw was aware of the stress and health problems Humenik was undergoing around the time he inherited the Property, as well as Humenik’s inexperience with property ownership.  (See FAXC ¶¶ 29-31.)  Goodlaw and another former teacher and director of the Credit Union, Larry Auzene (“Auzene”) worked together to take advantage of Humenik’s situation and inexperience and convince him under false pretenses to sell the Property to Goodlaw for below market value.  (See FAXC ¶¶ 16, 35-47.)[1]

Goodlaw also agreed to enter into a 30-year note (the “Note”) that would function as an annuity for Humenik’s benefit.  (See FAXC ¶¶ 53-54.)  Goodlaw structured the terms of the sale such that he did not have to pay Humenik any money at the time of the sale.  (FAXC ¶ 61.) 

Humenik remained in the Property until 2020; during that time he paid rent to Goodlaw in an amount larger than what Goodlaw repaid him on the Note.  (FACX ¶¶ 68-69.)  In around June 2019, Humenik was advised that the sale price of the Property may have been low.  (FAXC 72.)

Goodlaw filed a demurrer (the “Demurrer”) to the first cause of action in the FAXC on the grounds that the FAXC fails to state facts sufficient to constitute a cause of action.  Goodlaw also filed a motion to strike (the “Motion”) portions of the FAXC

DEMURRER

Meet and Confer

The meet and confer requirement has been met for the Demurrer and Motion.

Legal Standard

A demurrer tests the sufficiency of a complaint as a matter of law.  (Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1358.)  The court accepts as true all material factual allegations and affords them a liberal construction, but it does not consider conclusions of fact or law, opinions, speculation, or allegations contrary to law or judicially noticed facts.  (Shea Homes Limited Partnership v. County of Alameda (2003) 110 Cal.App.4th 1246, 1254.)  With respect to a demurrer, the complaint must be construed liberally by drawing reasonable inferences from the facts pleaded.  (Rodas v. Spiegel (2001) 87 Cal.App.4th 513, 517.)  A demurrer will be sustained without leave to amend if there exists no reasonable possibility that the defect can be cured by amendment.  (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) 

First Cause of Action

Under Civil Code section 1689, subdivision (b)(1), a party to a contract may rescind the contract if the consent of the party rescinding was given by mistake, or obtained through duress, menace, fraud, or undue influence, exercised by or with the connivance of the party as to whom he rescinds, or of any other party to the contract jointly interested with such party.  (Civ. Code § 1689, subd. (b)(1).)

The elements of intentional misrepresentation are: (1) misrepresentation; (2) knowledge of falsity; (3) intent to defraud, i.e., to induce reliance; (4) justifiable reliance; and (5) resulting damage.  (Golden Eagle Land Investment, L.P. v. Rancho Santa Fe Assn. (2018) 19 Cal.App.5th 399, 428.) 

The Demurrer argues that the FAXC fails to allege a rescission claim because it does not sufficiently allege that Goodlaw misrepresented a material fact or that Humenik’s reliance on any alleged representation was reasonable.  The Court is not persuaded by these arguments.  The FAXC alleges numerous representations made to Humenik by Goodlaw regarding the value of the Property and reasons why Humenik should sell it.  The FAXC also alleges numerous explanations for Humenik’s reliance on and trust in the information presented to him by Goodlaw and Azure.  (See FAXC ¶¶ 35-47.)  The Court therefore OVERRULES the Demurrer.

MOTION TO STRIKE

Legal Standard

A motion to strike either: (1) strikes any irrelevant, false or improper matter inserted in any pleading; or (2) strikes any pleading or part thereof not drawn or filed in conformity with the laws of this state, a court rule or order of court.  (CCP § 436.)

Punitive Damages

A plaintiff may recover punitive damages in an action for breach of an obligation not arising from contract when the plaintiff proves by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice.  (Civ. Code § 3294, subd. (a).) 

The Motion’s arguments are rooted in the issues regarding the sufficiency of the alleged fraud that were raised in the Demurrer.  Based on the Court’s analysis of the Demurrer, the Court DENIES the Motion.

Goodlaw is ordered to file a responsive pleading within 30 days of this order.

Moving party is ordered to give notice of this ruling.

Parties who intend to submit on this tentative must send an email to the Court at SMC_DEPT56@lacourt.org as directed by the instructions provided on the court website at www.lacourt.org.  If the department does not receive an email and there are no appearances at the hearing, the motion will be placed off calendar. 

  Dated this 10th day of August 2023