Judge John J. Kralik, Case 22BBCV00162 2023-01-06 Tentative Ruling

Plaintiff Tequila Tres Mujeres Sa De CV (“Plaintiff”) alleges that in 2012, Plaintiff and Defendant USA Wine & Spirits, Inc. (“Defendant”) entered into an oral agreement whereby Plaintiff would produce and bottle Casino Azul branded by Plaintiff and Defendant would sell the product to Defendant per purchase orders from Defendant and corresponding invoices from Plaintiff. Plaintiff alleges that Defendant was obligated to pay the invoices for the product on Net 30 credit terms. Plaintiff alleges that in May 2021, Defendant started to order shipments of the product and was invoiced accordingly: (1) Invoice No. 2602 dated May 28, 2021 for US$57,061.00; (2) Invoice No. 2633 dated June 11, 2021 for US$57,061.28; and (3) Invoice No. 2748 dated August 30, 2021 for US$53,042.88. Plaintiff alleges that Defendant failed to pay for the product and the subject invoices remain unpaid.

The complaint, filed March 10, 2022, alleges causes of action for: (1) breach of contract; (2) common counts; (3) open book account; and (4) account stated.

On September 9, 2022, Defendant filed a first amended cross-complaint (“FAXC”) against Plaintiff for: (1) breach of contract; (2) promissory estoppel; (3) intentional misrepresentation; and (4) negligent misrepresentation.

On November 7, 2022, Plaintiff/Cross-Defendant Tequila Tres Mujeres Sa De CV (“Tequila”) filed a demurrer to the FAXC.

On December 22, 2022, Defendant/Cross-Complainant USA Wine & Spirits, Inc. (“USA Wine”) filed an opposition brief. The opposition generally argues that all of the FAXC’s allegations support all the causes of action and that USA Wine’s allegations are sufficient to overrule the demurrer.

The essential elements of a cause of action for breach of contract are: “(1) the existence of the contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendant's breach, and (4) the resulting damages to plaintiff.” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.)

First, Tequila demurs to the 1^st cause of action in the FAXC, arguing that the terms of the written contract attached as Exhibit A to the FAXC is not signed and does not show that Tequila is a party to the agreement. Exhibit A includes the Import/Export Agreement for brand name “Casino Azul” which states that it is entered between USA Wine (importer) and Tequila (owner). The document is dated September 1, 2011, but is not signed by USA Wine or Tequila. (FAXC, Ex. A.)

Here, the September 1, 2011 agreement is not signed. However, based on USA Wine’s allegations, the parties nevertheless had an ongoing business relationship such that they appear to have a practice of handwriting price changes, such as the August 2019 handwritten modification of prices and the April 16, 2021 signed modification. (See FAXC, ¶¶8-11 and 17-18, Ex. B [August 2019], Ex. C [April 16, 2021].) On April 27, 2021, Tequila then submitted a price change via email. (Id., §18, Ex. D.) While the initial September 1, 2011 agreement is not signed, it appears that the parties nevertheless entered into a contractual business relationship—whether in part express/written (based on modifications), oral, or implied—such that a breach of contract cause of action may still be viable. Thus, the Court will not sustain the demurrer based solely on Tequila’s argument that the September 1, 2011 agreement was not signed.

Next, Tequila also argues that USA Wine fails to allege the nature of the contract with certainty. Tequila again argues that the written agreement is not signed and that USA Wine’s allegation that the parties established a good standing business relationship through the years and frequently communicated, established and modified terms of their business relationship via WhatsApp messages and/or by email is uncertain as to how and what terms were modified. (See FAXC, ¶8.) Tequila argues that the terms of the parties’ agreement was uncertain as the agreement and FAXC fail to allege how many bottles of each type of tequila it was obligated to fill or the agreed payment—for example, USA Wine (distributor) alleges that it would provide empty bottles to Tequila (distillery) that Tequila was required to fill and return to USA Wine for sale and distribution in exchange for payment. (FAXC, ¶24.)

As currently alleged, USA Wine’s facts in the FAXC are sufficient to allege that the parties had a long-standing business relationship that the parties were able to perform. It appears each request, fulfillment, and delivery would depend on the particular shipment (or invoice, if any).[1] Based on the allegations of the FAXC and the attached exhibits of handwritten or emailed price changes, it appears that the parties had an understanding of how to modify agreements and adjust pricing. While not every single term of the parties’ agreement is alleged, the allegations of the FAXC are sufficient to put Tequila on notice of the claims against it. Admittedly, there are various factual questions, particularly regarding the nature of the contract and its terms, the parties’ intent and understanding of their contractual obligations, etc., that will have to be determined beyond the pleading stage upon consideration of parol evidence. Whether any of the ordering or pricing terms were not in accordance with the arrangements of a particular shipment requires more particularity than is necessary to state a claim. The particularities of each allegedly unsatisfactory shipment will need to be explored in discovery.

Finally, Tequila argues that USA Wine has not alleged the date of the alleged breach. In the FAXC, USA Wine alleges that sometime during the 2019 to 2020 calendar year, Tequila promised to accept and fill 1,200 pallets of empty bottles for USA Wine, but Tequila delayed the orders or sent damaged packaging, etc. (FAXC, ¶12.) Thereafter, the parties met in early 2021 and Tequila allegedly agreed to fulfill more orders from 2021 to 2022, but in March 2021, Tequila refused to accept additional bottles. (Id., ¶¶14-15.) USA Wine alleges that on May 30, 2021, Tequila only sent 2 trucks worth of bottles and failed to complete its end of the agreement. (Id., ¶19.) The FAXC alleges at least one date of breach on May 30, 2021 and thus sufficiently alleges a breach of the parties’ agreement.

In the 2^nd cause of action, USA Wine alleges that Tequila (Pablo Partida) promised to USA Wine that, among other things, it can and would fill 700 pallets of empty bottles with 3 types of tequila, accurately package and label each bottle according to the parties’ understanding and prior business practices, and timely return the tequila bottles to USA Wine for sale and distribution. (FAXC, ¶30.) USA Wine alleges that Tequila did not intend to keep its promises and failed to perform its promises and that USA Wine reasonably relied on Tequila’s promises. (Id., ¶¶31-32.)

Tequila argues that the allegations of the FAXC fail to allege specific facts about the clear and unambiguous terms of the promise, such as the price for the bottles, the time frame to fill the bottles, and how many bottled would be filled with specific types of tequila (or how many bottles were needed to fill 700 pallets). These are essentially the same arguments as the arguments presented with respect to the 1^st cause of action for breach of contract. For the same reasons above, the Court will overrule the demurrer to the 2^nd cause of action.

In the 3^rd cause of action, USA Wine alleges that Tequila represented to USA Wine that it can fill 700 pallets of empty bottle with 3 types of tequila at the parties’ agreed upon price, accurately package bottles, and return the bottles within the agreed-upon 30-day timeframe. (FAXC, ¶35.) USA Wine alleges that Tequila knew its representations were false and it intentionally mislabeled and mispackaged the tequila in order to deceive USA Wine and customs. (Id., ¶¶36-37.) USA Wine also alleges that Tequila represented it would fill its prior late orders at the agreed upon price and could accept more empty bottles to fill, but it intended to obtain the empty bottles and wrongfully increase the price. (Id., ¶38.) USA Wine alleges that Tequila intended USA Wine to rely on its statements, and USA Wine reasonably relied thereto. (Id., ¶39.)

Tequila argues that this cause of action is not adequately pled because it fails to allege who made the representations, how the representations were made, when and where they were made, and to whom they were made. A review of the FAXC and 3^rd cause of action show that USA Wine has not pled this cause of action with specificity regarding how, when, where, to whom, and by what means the misrepresentations were tendered.

To allege a cause of action for negligent misrepresentation, the requisite elements are: (1) a misrepresentation of a past or existing material fact; (2) without reasonable grounds for believing it to be true; (3) with intent to induce another's reliance on the fact misrepresented; (4) ignorance of the truth and justifiable reliance thereon by the party to whom the misrepresentation was directed; and (5) damages. (B.L.M. v. Sabo & Deitsch (1997) 55 Cal. App. 4th 823, 834.) Negligent misrepresentation, unlike fraud, does not require knowledge of falsity. (Apollo Capital Fund, LLC v. Roth Capital Partners, LLC (2007) 158 Cal.App.4th 226, 243.) However, like fraud, “[e]ach element in a cause of action for. . . negligent misrepresentation must be factually and specifically alleged.” (Cadlo v. Owens-Illinois, Inc. (2004) 125 Cal.App.4^th 513, 519.)

Tequila demurs to the 4^th cause of action, arguing that the basis for this claim is its alleged representation that it can fill 700 pallets of empty bottles, which is a representation about a future event. Tequila argues that a representation about a future event cannot be the basis for negligent misrepresentation claim.

The Court of Appeal in Cohen v. S & S Construction Co. (1983) 151 Cal.App.3d 941, 946 addressed future facts as follows:

Generally, actionable misrepresentation must be one of existing fact; “predictions as to future events, or statements as to future action by some third party, are deemed opinions, and not actionable fraud ....” (4 Witkin, Summary of Cal. Law (8th ed. 1974) Torts, § 447, p. 2712.) But there are exceptions to this rule: “(1) where a party holds himself out to be specially qualified and the other party is so situated that he may reasonably rely upon the former's superior knowledge; (2) where the opinion is by a fiduciary or other trusted person; [and] (3) where a party states his opinion as an existing fact or as implying facts which justify a belief in the truth of the opinion.” (Borba v. Thomas (1977) 70 Cal.App.3d 144, 152 [138 Cal.Rptr. 565].)

In the FAXC, USA Wine alleges that the parties had a good standing business relationship throughout the year and frequently communicated, established, and modified the terms of their business relationship via WhatsApp messages and/or by email. (FAXC, ¶8; see also ¶30 [referring to the parties’ understanding and prior business practices].) While the alleged misrepresentation at issue may refer to a future event or actions, they also relate to the party’s present abilities. Tequila’s statements (accepted as true at the pleading stage) and the parties’ prior business relationship and practices are sufficient to rise to the level of showing that USA Wine relied on these representations and thereby continued its business relationship with Tequila regarding the 700 pallets.

As this is the only basis upon which Tequila has demurred to the 4^th cause of action, the demurrer to the 4^th cause of action is overruled.

Plaintiff/Cross-Defendant Tequila Tres Mujeres Sa De CV’s demurrer to Defendant/Cross-Complainant USA Wine & Spirits, Inc.’s first amended cross-complaint is sustained with 20 days leave to amend as to 3^rd cause of action and overruled as to the 1^st, 2^nd, and 4^th causes of action.

[1] Based on USA Wine’s allegations in paragraph 16, it spears the parties had invoices as it alleges that USA Wine conducted a review of “the prior invoices and shipments.”

Superior Court of California

County of Los Angeles

Department B