Judge: Holly J. Fujie, Case: 23STCV16985, Date: 2024-01-30 Tentative Ruling

Case Number: 23STCV16985    Hearing Date: January 30, 2024    Dept: 56

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF LOS ANGELES - CENTRAL DISTRICT

AND RELATED CROSS-ACTION

MOVING PARTY: Plaintiff/Cross-Defendant Old Republic National Title Insurance Company (“Old Republic”)

RESPONDING PARTY: Defendant/Cross-Complainant Oaktree Investment Fund, LLC (“Oaktree”)

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

BACKGROUND

            This action arises out of an insurance dispute.  Old Republic’s complaint (the “Complaint”) alleges declaratory relief.

Oaktree’s currently operative first amended cross-complaint (the “FAXC”) alleges: (1) specific performance; (2) breach of contract; (3) breach of implied covenant of good faith and fair dealing; (4) negligent misrepresentation; and (5) indemnity.

In relevant part, the FAXC alleges:  On or about October 7, 2022, Oaktree entered into a purchase and sale agreement for the purchase of real property (the “Property”).  (FAXC ¶ 9.)  During the due diligence process, Oaktree received a September 28, 2022 Preliminary Title Report (the “September 28 Report”) from California Best Title.  (FAXC ¶ 10.)  The September 28 Report stated that the Property was subject to a land use restriction agreement (“LURA”) exception.  (FAXC ¶ 10.)  When Oaktree opened escrow on or about October 12, 2022, Oaktree received an updated report dated September 30, 2022 (the “September 30 Report”).  (FAXC ¶ 11.)  After Oaktree reviewed the September 30 Report, its representative spoke to Nick Guzman (“Guzman”), a title officer at California Best Title, who explained that the September 30 Report was the correct title report and that the LURA was no longer applicable to the Property and had been deleted from the document.  (See FAXC ¶ 12.)  Guzman failed to properly investigate the applicability of the LURA and had no reasonable grounds to state that it no longer applied.  (FAXC ¶ 13.) 

On or about January 27, 2023, a title insurance policy (the “Policy”) related to the purchase of the Property was issued to Oaktree by Old Republic.  (FAXC ¶ 15, Exhibit C.)  Pursuant to the September 30 Report, the Policy did not list the LURA as an exception from coverage.  (FAXC ¶ 16.)  After Oaktree purchased the Property, the Affordable Housing Group contacted Plaintiff regarding compliance and compensation under the LURA.  (FAXC ¶ 20.)  Oaktree tendered a claim to Old Republic regarding the inclusion of the LURA on the Property’s title, and Old Republic subsequently filed its Complaint in this action.  (See FAXC ¶¶ 21-22.)

Old Republic filed a demurrer to the fourth cause of action on the grounds that the XC does not state sufficient facts to constitute a cause of action and the cause of action is uncertain.

DISCUSSION

Meet and Confer

            The meet and confer requirement has been met.

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.) 

Demurrers for uncertainty are disfavored.  (Chen v. Berenjian (2019) 33 Cal.App.5th 811, 822.)  A demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures.  (Id.) 

Fourth Cause of Action: 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.  (Apollo Capital Fund, LLC v. Roth Capital Partners, LLC (2007) 158 Cal.App.4th 226, 243.)  A positive assertion is required; an omission or an implied assertion or representation is not sufficient.  (Id.)  Responsibility for negligent misrepresentation rests upon the existence of a legal duty, imposed by contract, statute or otherwise, owed by a defendant to the injured person.  (Bock v. Hansen (2014) 225 Cal.App.4th 215, 228.)  California courts have recognized a cause of action for negligent misrepresentation, i.e., a duty to communicate accurate information, in two circumstances.  (Id. at 229.)  The first situation arises where providing false information poses a risk of and results in physical harm to person or property.  (Id.)  The second situation arises where information is conveyed in a commercial setting for a business purpose.  (Id.)  With respect to the second situation, the duty extends only to losses suffered by plaintiffs belonging to a limited group of persons for whose benefit and guidance the misrepresentation was made.  (Leining v. Foster Poultry Farms, Inc. (2021) 61 Cal.App.5th 203, 219.)

The basis for the negligent misrepresentation against Old Republic is not clearly alleged.  The representations regarding the LURA exception were made by California Best Title, and there is no clear relationship between that entity and Old Republic alleged in the body of the FAXC.  The Court therefore SUSTAINS the Demurrer with 20 days leave to amend.

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 30th day of January 2024