Judge Lynette Gridiron Winston, Case Number: 24PSCV00166, Date: 2024-10-02 Tentative Ruling

Judge: Lynette Gridiron Winston, Case: 24PSCV00166, Date: 2024-10-02 Tentative Ruling

Case Number: 24PSCV00166 Hearing Date: October 2, 2024 Dept: 6

CASE NAME: Heavenstone Corporation v. Ecoff Campain Tilles & Kay, LLP, et al.

General and Special Demurrers of Defendants Ecoff Campaign Tilles & Kay, LLP, Lawrence C. Ecoff and Kevin T. Kay to the First Amended Complaint of Plaintiff Heavenstone Corporation

TENTATIVE RULING

The Court OVERRULES the demurrer to the entire First Amended Complaint, Third Cause of Action, and Fifth Cause of Action on the grounds that they are time-barred under Code of Civil Procedure section 340.6. The Court SUSTAINS the demurrer to the First, Second, and Fourth Causes of Action on the grounds that they are time-barred under Code of Civil Procedure section 340.6. The Court SUSTAINS the demurrer to the Third and Fifth Causes of Action for failure to state a cause of action. The Court will hear from Plaintiff at the hearing on the demurrer whether the defects noted herein can be corrected.

Defendants are ordered to give notice of the Court’s ruling within five calendar days of this order.

BACKGROUND

This is a legal services related lawsuit. On January 16, 2024, plaintiff Heavenstone Corporation (Plaintiff) filed this action against defendants Ecoff Campaign Tilles & Kay, LLP (Law Firm), Lawrence C. Ecoff (Ecoff), Kevin T. Kay (Kay) (collectively, Defendants), and Does 1 through 25, alleging causes of action for legal malpractice, fraud, breach of fiduciary duty, breach of contract, breach of implied covenant of good faith and fair dealing, and civil conspiracy to commit fraud. On July 23, 2024, Plaintiff filed the operative First Amended Complaint (FAC) against Defendants, alleging causes of action for breach of contract, breach of implied covenant of good faith and fair dealing, contractual fraud, breach of implied covenant of fiduciary duty, and civil conspiracy to commit fraud.

On August 23, 2024, Defendants demurred to the FAC. On September 18, 2024, Plaintiff opposed the demurrer. On September 25, 2024, Defendants filed a late reply.

LEGAL STANDARD

A demurrer is a pleading used to test the legal sufficiency of other pleadings. It raises issues of law, not fact, regarding the form or content of the opposing party's pleading (complaint, answer or cross-complaint). (Code Civ. Proc., § 422.10; see Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) It is not the function of the demurrer to challenge the truthfulness of the complaint; and for purposes of ruling on the demurrer, all facts pleaded in the complaint are assumed to be true. (Id.)

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; Donabedian, supra, 116 Cal.App.4th at p. 994.) No other extrinsic evidence can be considered. (Ion Equip. Corp. v. Nelson (1980) 110 Cal.App.3d 868, 881 [error for court to consider facts asserted in memorandum supporting demurrer]; see also Afuso v. United States Fid. & Guar. Co. (1985) 169 Cal.App.3d 859, 862, disapproved on other grounds in Moradi-Shalal v. Fireman’s Fund Ins. Cos. (1988) 46 Cal.3d 287 [error to consider contents of release not part of court record].)

A demurrer can be utilized where the “face of the complaint” itself is incomplete or discloses some defense that would bar recovery. (Guardian North Bay, Inc. v. Superior Court (2001) 94 Cal.App.4th 963, 971-972.) The “face of the complaint” includes material contained in attached exhibits that are incorporated by reference into the complaint, or in a superseded complaint in the same action. (Frantz v. Blackwell (1987) 189 Cal.App.3d 91, 94; see also Barnett v. Fireman’s Fund Ins. Co. (2001) 90 Cal.App.4th 500, 505 [“[W]e rely on and accept as true the contents of the exhibits and treat as surplusage the pleader’s allegations as to the legal effect of the exhibits.”])

A demurrer can only be sustained when it disposes of an entire cause of action. (Poizner v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 119; Kong v. City of Hawaiian Gardens Redev. Agency (2003) 108 Cal.App.4th 1028, 1046.)

PRELIMINARY ISSUE

The Court notes that Defendants’ notice of demurrer and demurrer are four pages long, and contain substantive arguments in support of the demurrer. This is improper. The notice of a motion requires a statement of the nature of the order sought and the grounds for issuing the order, plus the hearing information. (Cal. Rules of Court, rule 3.1110, subds. (a)-(b).) The motion identifies parties bringing the motion, the parties to whom it is addressed, briefly states the basis for the motion and the relief sought, and, if challenging a pleading, states the specific portion of the pleading challenged, (Id., rule 3.1112, subd. (d)). The Court admonishes Defendants to comply with the requirements of the California Rules of Court going forward.

DISCUSSION

Meet and Confer

Per Code of Civil Procedure section 430.41, subdivision (a), Defendants were required to meet and confer in person, by telephone, or by video conference before bringing this demurrer. (Code Civ. Proc., § 430.41, subd. (a); Dept. 6 Courtroom Information [“Parties are required to meet and confer in person, by telephone, or by video conference before filing any motion.”]) The Court finds Defendants’ efforts to meet and confer insufficient, as there is no indication that counsel for Defendants attempted to meet and confer in person, by telephone, or by video conference. (See Smith Decl., ¶¶ 2-3.) However, the Court may not overrule a demurrer for failure to adequately meet and confer. (Code Civ. Proc., § 430.41, subd. (a)(4).) The Court will still consider the demurrer, but admonishes Defendants to comply with the requirements of the Code of Civil Procedure going forward.

First Amended Complaint and All Causes of Action – Statute of Limitations

“One of the primary functions of the demurrer is to filter out actions which lack substantial basis without the time and labor of trial. Where the complaint discloses that the statute of limitations bars the action, the general demurrer has long been held an appropriate means to assert such a facial defect. [Citations.]” (Saliter v. Pierce Bros. Mortuaries (1978) 81 Cal.App.3d 292, 300.) “While a demurrer based on statute of limitations lies where the dates in question are shown on the face of the complaint, if those dates are missing, there is no ground for a general demurrer. [Citations.]” (United W. Med. Centers v. Superior Ct. (1996) 42 Cal.App.4th 500, 505, italics added.)

The statute of limitations for claims against attorneys arising out of their performance of professional services is one year from the date the plaintiff knew or should have known of the facts constituting the wrongful act or omission, or four years from the date of the wrongful act or omission, whichever occurs first. (Code Civ. Proc., § 340.6, subd. (a); see also Austin v. Medicis (2018) 21 Cal.App.5th 577, 587 [Code of Civil Procedure section 340.6, subdivision (a), is not limited to claims for legal malpractice, but includes any claims arising out of the attorney’s rendering of professional services].)

Defendants demur to the FAC and all causes of action contained in it on the grounds that they are time-barred and therefore fail to state a cause of action. Defendants contend the FAC alleges that Plaintiff either knew or should have known of Defendants’ alleged wrongdoing in the handling of the underlying unlawful detainer action as early as April 18, 2022, i.e., the date the judgment in the underlying unlawful detainer action was entered, and as late as December 5, 2022, i.e., the date when the motion to set aside the judgment was denied. Defendants then note that Plaintiff did not file its complaint until more than one year later on January 16, 2024, which makes this action time-barred under Code of Civil Procedure section 340.6.

Defendants further contend that Code of Civil Procedure section 340.6 applies to not only claims for legal malpractice, but any claim for wrongful conduct arising from the performance of professional services. Defendants note that Plaintiff’s original complaint included a cause of action for legal malpractice, and that the allegations of the FAC are virtually identical to the original complaint, but instead omits the legal malpractice claim in favor of alternative causes of action sounding in breach of contract. Defendants contend this effort fails because these causes of action are still subject to the one-year limitations period under Code of Civil Procedure section 340.6, as Plaintiff’s claims are based upon allegations of Defendants’ actions arising out of the provision of professional services in handling the underlying unlawful detainer action.

In opposition, Plaintiff claims to have clearly articulated a rubric of facts and law that entitles it to a complaint for damages upon each cause of action pleaded in the FAC. Plaintiff also contends Defendants are inappropriately attempting to reclassify the FAC as a legal malpractice complaint in an effort to get it dismissed.

The Court finds the First, Second, and Fourth Causes of Action of the FAC are subject to the one-year statute of limitations under Code of Civil Procedure section 340.6. Defendants correctly contend that Code of Civil Procedure section 340.6 is not limited to legal malpractice claims, but rather includes all causes of action arising out of the provision of legal services, except for actual fraud. (See Code Civ. Proc., § 340.6, subd. (a); Austin v. Medicis, supra, 21 Cal.App.5th at p. 587.) The First, Second, and Fourth Causes of Action for breach of contract, breach of the implied covenant of good faith and fair dealing, and breach of the implied covenant of fiduciary duty are based on Defendants’ alleged provision of legal services during the underlying unlawful detainer action and are not fraud based claims. (See FAC, ¶¶ 11-30.) The FAC alleges that the judgment was entered against Plaintiff in the underlying unlawful detainer action on April 18, 2022, and that the motion to set aside the judgment was denied on December 5, 2022, both of which are more than one year before Plaintiff filed this lawsuit on January 16, 2024. (FAC, ¶¶ 22-23.) It is clear from the face of the FAC that Plaintiff either knew or should have known of Defendants’ alleged wrongdoing for more than one year before they finally filed this lawsuit. (See United W. Med. Centers v. Superior Ct., supra, 42 Cal.App.4th at p. 505.)

Additionally, Plaintiff’s opposition is conclusory and contains no substantive argument to rebut Defendants’ contentions, which the Court construes as a tacit admission that Defendants’ contentions are meritorious. (Sexton v. Superior Court (1997) 58 Cal.App.4th 1403, 1410; C. Opposing the Motion—and Rebutting the Opposition, Cal. Prac. Guide Civ. Pro. Before Trial Ch. 9(I)-C, ¶ 9:105.10; see also Moulton Niguel Water Dist. v. Colombo (2003) 111 Cal.App.4th 1210, 1215 [“Contentions are waived when a party fails to support them with reasoned argument and citations to authority. [Citation.]”]) The Court further finds that Plaintiff’s opposition fails to make any offer of proof as to how these pleading defects can be cured, but instead makes conclusory arguments that facts can be added to cure the defects. (See Opp., p. 3.)

The Court does note, however, that Code of Civil Procedure section 340.6 expressly excludes actual fraud claims. (See Code Civ. Proc., § 340.6, subd. (a).) This means it does not apply to Plaintiff’s Third and Fifth Causes of Action for contractual fraud and conspiracy to commit contractual fraud.

Based on the foregoing, the Court SUSTAINS the demurrer to the First, Second, and Fourth Causes of Action. The Court will hear from Plaintiff at the hearing on the demurrer whether facts can be alleged that will cure the defects noted herein with respect to the First, Second, and Fourth Causes of Action. The Court OVERRULES the demurrer to the entire First Amended Complaint. The Court OVERRULES the demurrer as to the Third and Fifth Causes of Action, but only as to the grounds that they are barred by the statute of limitations. The Court will still consider Defendants’ demurrer to the Third and Fifth Causes of Action on the grounds that they fail to state a cause of action, as set forth below.

Third and Fifth Causes of Action – Contractual Fraud and Conspiracy to Commit Contractual Fraud

To state a cause of action for fraud, the plaintiff must allege facts demonstrating, “(1) the defendant represented to the plaintiff that an important fact was true; (2) that representation was false; (3) the defendant knew that the representation was false when the defendant made it, or the defendant made the representation recklessly and without regard for its truth; (4) the defendant intended that the plaintiff rely on the representation; (5) the plaintiff reasonably relied on the representation; (6) the plaintiff was harmed; and (7) the plaintiff's reliance on the defendant's representation was a substantial factor in causing that harm to the plaintiff. [Citation.]” (Graham v. Bank of Am., N.A. (2014) 226 Cal.App.4th 594, 605-606, internal quotation marks omitted.) “In California, fraud must be pled specifically; general and conclusory allegations do not suffice. [Citations.] Thus the policy of liberal construction of the pleadings ... will not ordinarily be invoked to sustain a pleading defective in any material respect. [Citation.] [¶] This particularity requirement necessitates pleading facts which show how, when, where, to whom, and by what means the representations were tendered. [Citation.] A plaintiff's burden in asserting a fraud claim against a corporate employer is even greater. In such a case, the plaintiff must allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written. [Citation.]” (Lazar v. Superior Ct. (1996) 12 Cal.4th 631, 645, internal quotation marks omitted and italics in original (Lazar).)

“The elements of a civil conspiracy are (1) the formation of a group of two or more persons who agreed to a common plan or design to commit a tortious act; (2) a wrongful act committed pursuant to the agreement; and (3) resulting damages. [Citation.]” (City of Indus. v. City of Fillmore, supra, 198 Cal.App.4th at p. 212.) “Civil conspiracy is not an independent tort.” (City of Indus. v. City of Fillmore (2011) 198 Cal.App.4th 191, 211.)

Defendants demur to the Third and Fifth Causes of Action for contractual fraud and conspiracy to commit contractual fraud, respectively, on the grounds that they fail to state a cause of action. With respect to the Third Cause of Action for contractual fraud, Defendants contend it fails to allege Defendants’ specific misrepresentations and is unable to show justifiable reliance on any purported misrepresentation. Defendants also contend this cause of action lacks the specificity required for a fraud claim per Lazar. With respect to the Fifth Cause of Action for conspiracy to commit contractual fraud, Defendants contend it fails because the FAC does not allege facts showing that Defendants had knowledge of each Defendants’ alleged wrongful acts, agreed to both the objective and the course of the action, and engaged in an act with the intent to further the alleged wrongful agreement. Defendants also contend that the FAC alleges Ecoff and Kay are partners of Law Firm, and that it is well settled that agents or employees of a company cannot conspire with the company while acting in their official capacities on behalf of the company.

In opposition, Plaintiff’s arguments are the same as those set forth above, namely that Plaintiff contends to have pleaded sufficient facts to state causes of action for each cause of action of the FAC.

The Court agrees with Defendants and finds that the FAC fails to plead sufficient facts to state a cause of action for contractual fraud. The FAC fails to identify any specific misrepresentations Defendants allegedly made to Plaintiff. (See FAC, ¶¶ 11-30.) It fails to allege how the misrepresentations were made, when, where, to whom, and by what means they were made. (See Id.; Lazar, supra, 12 Cal.4th at p. 645.) Also, since Law Firm is alleged to be a business entity, (FAC, ¶ 2), Plaintiff needed to allege additional facts, such as the names of the person who made the misrepresentations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written. (Id.) As the FAC currently stands, it fails to plead contractual fraud with the requisite specificity, and thereby fails to state a cause of action.

The Court also agrees with Defendants that the FAC fails to plead sufficient facts to state a cause of action for conspiracy to commit contractual fraud. Although not mentioned in the demurrer, the Court notes that, without a predicate cause of action for contractual fraud, Plaintiff has also necessarily failed to allege civil conspiracy liability. (See Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 511 [a civil conspiracy by itself is insufficient to state a cause of action, and requires the commission of an actual tort].) Even assuming the FAC otherwise stated a cause of action for contractual fraud, the FAC does not allege sufficient facts demonstrating a conspiracy between the Defendants. The FAC contains no allegations demonstrating any sort of an agreement to commit a tortious act towards Plaintiff. (See FAC, ¶¶ 11-30.) Defendants also correctly contend that employees or agents of a business entity cannot conspire with that business entity. (Applied Equipment Corp. v. Litton Saudi Arabia Ltd., supra, 7 Cal.4th at p. 511 fn. 4.) The FAC does not allege any facts demonstrating that Ecoff or Kay were acting outside the scope of their authority as partners of Law Firm. (See FAC, ¶¶ 11-30.)

Additionally, as also noted above, Plaintiff’s opposition is conclusory and contains no substantive argument to rebut Defendants’ contentions, which the Court construes as a tacit admission that Defendants’ contentions are meritorious. (Sexton v. Superior Court, supra, 58 Cal.App.4th at p. 1410; C. Opposing the Motion—and Rebutting the Opposition, Cal. Prac. Guide Civ. Pro. Before Trial Ch. 9(I)-C, ¶ 9:105.10; see also Moulton Niguel Water Dist. v. Colombo, supra, 111 Cal.App.4th at p. 1215 [“Contentions are waived when a party fails to support them with reasoned argument and citations to authority. [Citation.]”])

Based on the foregoing, the Court SUSTAINS the demurrer to the Third and Fifth Causes of Action. The Court will hear from Plaintiff at the hearing on the demurrer whether these defects can be cured by amendment.

CONCLUSION

Defendants are ordered to give notice of the Court’s ruling within five calendar days of this order.