Judge Lisa K. Sepe-Wiesenfeld, Case Number: 24SMCV00901, Date: 2025-02-19 Tentative Ruling

Judge: Lisa K. Sepe-Wiesenfeld, Case: 24SMCV00901, Date: 2025-02-19 Tentative Ruling

Defendants/Cross-Complainants Aaron Haxton, Taylor McKinnon, and Mr. Charlie Told Me So LLC may amend their cross-complaint only as authorized by the Court’s order and may not amend the complaint to add a new party or cause of action without having obtained permission to do so. (Harris v. Wachovia Mortgage, FSB (2010) 185 Cal.App.4th 1018, 1023.)

“[A] demurrer tests the legal sufficiency of the allegations in a complaint.” (Lewis v. Safeway, Inc. (2015) 235 Cal.App.4th 385, 388.) 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. (See Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994 [in ruling on a demurrer, a court may not consider declarations, matters not subject to judicial notice, or documents not accepted for the truth of their contents].) For purposes of ruling on a demurrer, all facts pleaded in a complaint are assumed to be true (Aubry v. Tri-City Hosp. Dist. (1992) 2 Cal.4th 962, 967), but the Court does not “assume the truth of contentions, deductions, or conclusions of fact or law” (Moore v. Regents of University of California (1990) 51 Cal.3d 120, 125).

Further, the court may, upon 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, subd. (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. (Code Civ. Proc., § 436, subd. (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. (Code Civ. Proc., § 436.) The grounds for moving to strike must appear on the face of the pleading or by way of judicial notice. (Code Civ. Proc., § 437.)

Leave to amend must be allowed where there is a reasonable possibility of successful amendment. (See Goodman v. Kennedy (1976) 18 Cal.3d 335, 349 [court shall not “sustain a demurrer without leave to amend if there is any reasonable possibility that the defect can be cured by amendment”]; Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1037 [“A demurrer should not be sustained without leave to amend if the complaint, liberally construed, can state a cause of action under any theory or if there is a reasonable possibility the defect can be cured by amendment.”]; Vaccaro v. Kaiman (1998) 63 Cal.App.4th 761, 768 [“When the defect which justifies striking a complaint is capable of cure, the court should allow leave to amend.”].) The burden is on the complainant to show the Court that a pleading can be amended successfully. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)

“To qualify for declaratory relief, a party would have to demonstrate its action presented two essential elements: (1) a proper subject of declaratory relief, and (2) an actual controversy involving justiciable questions relating to the party’s rights or obligations.” (Jolley v. Chase Home Finance, LLC (2013) 213 Cal.App.4th 872, 909, quotation marks and brackets omitted.)

In the first cause of action, Defendants/Cross-Complainants Aaron Haxton, Taylor McKinnon, and Mr. Charlie Told Me So LLC (“Cross-Complainants”) contend that Plaintiff/Cross-Defendant Tustin Legacy, LLC and Cross-Defendants Tommy Le, Nam Le, and Hai Le (“Cross-Defendants”) have no membership interest in Mr. Charlie Told Me So LLC (“MCTMS”) because there was no binding agreement, the purported oral agreement was breached, the statute of limitations bars Cross-Defendants’ claims, and Cross-Defendants have unclean hands, and they seek a declaration regarding the parties’ rights and obligations in MCTMS. (Cross-Compl. ¶¶ 16-17.) Put simply, it is not clear what sort of declaratory relief Cross-Complainants seek, as they provide only a general statement that they seek a judicial declaration regarding the parties’ rights and obligations, and the purported controversy is merely a restatement of the parties’ claims. A cause of action for declaratory relief should not be used as a second cause of action for the determination of identical issues raised in another cause of action. (General of America Insurance Co. v. Lilly (1968) 258 Cal.App.2d 465, 470.) For these reasons, Cross-Defendants’ demurrer to the first cause of action is SUSTAINED with thirty (30) days leave to amend.

To state a cause of action for breach of contract, Cross-Complainants must be able to establish “(1) the existence of the contract, (2) [cross-complainant’s] performance or excuse for nonperformance, (3) [cross-]defendant’s breach, and (4) the resulting damages to the [cross-complainant].” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.)

Cross-Complainants allege that to the extent the parties had an enforceable oral agreement for Cross-Defendants to acquire a membership interest in MCTMS, Cross-Defendants breached that agreement by failing to cooperate with Cross-Complainants. (Cross-Compl. ¶ 19.) This does not allege a claim for breach of contract because Cross-Complainants entirely fail to describe the purported contract and the terms thereof. Accordingly, Cross-Defendants’ demurrer to the second cause of action is SUSTAINED with thirty (30) days leave to amend.

“The elements of a cause of action for intentional misrepresentation are (1) a misrepresentation, (2) with knowledge of its falsity, (3) with the intent to induce another’s reliance on the misrepresentation, (4) actual and justifiable reliance, and (5) resulting damage.” (Daniels v. Select Portfolio Servicing, Inc. (2016) 246 Cal.App.4th 1150, 1166.) 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.)

Cross-Complainants allege that Cross-Defendants Tommy Le and Nam Le orally represented to Cross-Complainants Haxton and McKinnon that Cross-Defendants would become a member of MCTMS , but they failed to sign an operating agreement to that effect because they did not intend to become a member until MCTMS became successful. (Cross-Compl. ¶¶ 23-25.) Cross-Complainants do not allege any specific statements made to them, who made the statements, that person’s authority to speak for the corporate entity, when the statements were made, and by what means. Thus, Cross-Defendants’ demurrer to the third cause of action is SUSTAINED with thirty (30) days leave to amend.

A party to a contract may rescind it where the contract is unlawful, was the result of mistake, duress, menace, fraud, or undue influence, or will prejudice the public interest if permitted to stand, or if there was a failure of consideration. (Civ. Code, § 1689, subd. (b).)

Cross-Complainants seek to rescind “any and all agreements” between the parties regarding Cross-Defendants’ acquisition of a membership interest. (Cross-Compl. ¶ 33.) This does not sufficiently allege a contract that may be rescinded or the basis for rescission, and, as stated above, Cross-Complainants have not alleged the terms of a purported oral agreement between the parties. Accordingly, Cross-Defendants’ demurrer to the fourth cause of action is SUSTAINED with thirty (30) days leave to amend.

To set forth a claim for a violation of Business and Professions Code section 17200, Cross-Complainants must establish Cross-Defendants were engaged in an “unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising” and certain specific acts. (Bus. & Prof. Code, § 17200.)

Cross-Complainants allege that Cross-Defendants were engaged in a deceptive business practice of negotiating to acquire membership interests but failing to complete the agreement until the business became successful. (Cross-Compl. ¶ 37.) This does not sufficiently describe the purported improper practice, largely because the alleged wrongful conduct remains unclear. Further, the claim appears to be no different than the other claims, and a cause of action for unfair competition “is not an all-purpose substitute for a tort or contract action.” (Cortez v. Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163, 173.) Thus, Cross-Defendants’ demurrer to the fifth cause of action is SUSTAINED with thirty (30) days leave to amend.