Judge Holly J. Fujie, Case Number: 24STCV00622, Date: 2024-12-02 Tentative Ruling

MOVING PARTY: Defendant AKOS CIRCLE individually and dba RENOVATIO CUSTOM BUILD (“Defendant”)

This case relates to a home improvement contract at Plaintiff’s property located at 4645/4647 Ethel Ave., Sherman Oaks, CA 91423. The operative First Amended Complaint (“FAC”) asserts the following causes of action: (1) breach of contract; (2) negligence; (3) negligence; (4) breach of contract; (5) professional negligence; (6) accounting; (7) rescission – violation of Business and Professions Code section 7159 and Civil Code section 1689.7; (8) fraud – intentional misrepresentation; (9) disgorgement; (10) action on contractors bonds; and (11) action on disciplinary bond.

On August 19, 2024, Defendant filed a Demurrer to Plaintiff’s FAC (“Demurrer”) and a Motion to Strike Allegations in Plaintiff’s FAC (“Motion”). On November 15, 2024, Plaintiff filed an opposition to the Demurrer and an opposition to the Motion to Strike. Defendant filed replies on November 21, 2024.

The parties’ respective counsel present conflicting declarations regarding meet and confer efforts and timeliness of the Demurrer. The Court, in its discretion, will proceed to determine the merits of the Demurrer. (Code Civ. Proc., § 430.41, subd. (a)(4) [An insufficient meet and confer process is not grounds to overrule or sustain a demurrer.].)

A demurrer can be used only to challenge defects that appear on the face of the pleading under attack; or from matters outside the pleading that are judicially noticeable. (Blank v. Kirwan (1985) 39 Cal 3d 311, 318.) No other extrinsic evidence can be considered (i.e., no “speaking demurrers”). (Ion Equipment Corp. v. Nelson¿(1980) 110 Cal.App.3d 868, 881.)

A demurrer for sufficiency tests 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 in context. (Taylor v. City of Los Angeles Dep’t of Water & Power (2006) 144 Cal. App. 4th 1216, 1228.) 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 pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed.”¿ (SKF Farms v. Superior Ct. (1984) 153 Cal. App. 3d 902, 905.) “The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action.”¿ (Hahn, supra, 147 Cal.App.4th at 747.)¿

Here, Defendant demurs to the 8^th and 9^th causes of action in the FAC for fraud and disgorgement, respectively.

The elements of fraud are: “(a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Charnay v. Cobert (2006) 145 Cal.App.4th 170, 184.) A cause of action for fraud must be alleged with factual specificity. Plaintiff must plead facts showing “how, when, where, to whom, and by what means the representations were tendered. [Citation]” (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184.)

The FAC sets forth allegations pertaining to the elements of fraud: misrepresentation (FAC, para. 72), knowledge (para. 74), intent (para. 78), justifiable reliance (pars. 75-76) and resulting damage (para. 77). The allegations also sufficiently explain “how, when, where, to whom, and by what means” the representations were tendered. As an example, Plaintiff points to the following allegations: How – willfully deleting language from the Agreement (FAC, para. 74 “willfully deleted a portion of the statutory “Mechanic’s Lien Warning” notice” and “included in the Agreement”); When – on or about November 19, 2019, the contract date (FAC, para. 29); Where – in the Agreement (FAC, para. 74 “included in the Agreement”); To Whom – Plaintiff (FAC, para. 74 “would have advised Plaintiff” and para. 29 “Plaintiff ASTOR and RENOVATIO DEFENDANTS entered into an oral agreement memorialized in writing”); and By What Means – in writing (FAC, para. 74 “deleted a portion of the statutory “Mechanic’s Lien Warning” notice” and para. 29 “Plaintiff ASTOR and RENOVATIO DEFENDANTS entered into an oral agreement memorialized in writing”).

Thus, Plaintiff alleged sufficient facts to constitute fraud (misrepresentation). Accordingly, the demurrer to this cause of action is OVERRULED.

Business and Professions Code section 7031 provides that “a person who utilizes the services of an unlicensed contractor may bring an action in any court of competent jurisdiction in this state to recover all compensation paid to an unlicensed contractor for performance of any act or contract.” (Cal. Bus. & Prof. Code, § 7031(b).)

Plaintiff has alleged that Defendant was unlicensed by virtue of (1) failing to maintain proper workers compensation coverage to all employees or unlicensed subcontractors (FAC, para. 80); and (2) failing to exercise direct supervision and control over the construction operations (FAC, para. 81). Plaintiff also alleged that he paid compensation to Defendant for his services (FAC, para. 83: “at least $562,000 paid to Defendants…”).

Plaintiff has, therefore, stated a claim under this section. The Court, therefore, OVERRULES the demurrer to this claim.

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 that 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.) “When the defect which justifies striking a complaint is capable of cure, the court should allow leave to amend.” (Vaccaro v. Kaiman (1998) 63 Cal.App.4th 761, 768.)

Here, Defendant moves to strike, as relates to the 8^th cause of action, Paragraph 78 at Page 17 of the FAC in its entirety, and Prayers for Relief Nos. 22, 23 and 24 of the FAC in their entirety. Defendant also moves to strike, as relates to the 9^th cause of action, Paragraphs 84 and 85 at Page 18 of the FAC in their entirety, and Prayers for Relief Nos. 25 and 26 of the FAC in their entirety.

Since Plaintiff has pled the facts necessary to support its fraud and disgorgement causes of of action, therefore, the request to strike allegations pertaining to these causes of action and resulting damages should be denied. There are, however, insufficient allegations to support the request for punitive damages.

California Civil Code section 3294 authorizes the recovery of punitive damages in non-contract cases where “the defendant has been guilty of oppression, fraud, or malice . . . .” (Civ. Code, § 3294(a).) “‘Malice’ means conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.” (Id. § 3294(c)(1).) “‘Oppression’ means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights.” (Id., § 3294(c).) “‘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., § 3294(c)(3).) Punitive damages thus require more than the mere commission of a tort. (Taylor v. Superior Court (1979) 24 Cal.3d 890, 894-95.) Specific facts must be pleaded in support of punitive damages. (Hillard v. A.H. Robins Co. (1983) 148 Cal.App.3d 374, 391-92.)

As stated above, the FAC sufficiently alleges fraud and disgorgement, which allegations are sufficient to support a claim for punitive damages.

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.

Hon. Holly J. Fujie

Judge of the Superior Court