Judge: Lynne M. Hobbs, Case: 23STCV22308, Date: 2025-01-08 Tentative Ruling

Case Number: 23STCV22308    Hearing Date: January 8, 2025    Dept: 61

OSCAR QUINTERO, et al. vs FORD MOTOR COMPANY, et al.

TENTATIVE

Defendant Ford Motor Company’s Demurrer to the First Amended Complaint is OVERRULED. Defendant is ordered file and serve an Answer within 30 days. 

Plaintiff to give notice.

DISCUSSION

I. DEMURRER

A demurrer should be sustained only where the defects appear on the face of the pleading or are judicially noticed. (Code Civ. Pro., §§ 430.30, et seq.) In particular, as is relevant here, a court should sustain a demurrer if a complaint does not allege facts that are legally sufficient to constitute a cause of action. (See id. § 430.10, subd. (e).) As the Supreme Court held in Blank v. Kirwan (1985) 39 Cal.3d 311: “We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. . . . Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context.” (Id. at p. 318; see also Hahn. v. Mirda (2007) 147 Cal.App.4th 740, 747 [“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. [Citation.]”)

“In determining whether the complaint is sufficient as against the demurrer … if on consideration of all the facts stated it appears the plaintiff is entitled to any relief at the hands of the court against the defendants the complaint will be held good although the facts may not be clearly stated.” (Gressley v. Williams (1961) 193 Cal.App.2d 636, 639.)

“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.” (Khoury v. Maly’s of Cal., Inc. (1993) 14 Cal.App.4th 612, 616.) Such demurrers “are disfavored, and are granted only if the pleading is so incomprehensible that a defendant cannot reasonably respond.” (Mahan v. Charles W. Chan Insurance Agency, Inc. (2017) 14 Cal.App.5th 841, 848.)

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. (Schifando v. City of Los Angeles, supra, 31 Cal.4th at p. 1081.) The demurrer also may be sustained without leave to amend where the nature of the defects and previous unsuccessful attempts to plead render it probable plaintiff cannot state a cause of action. (Krawitz v. Rusch (1989) 209 Cal.App.3d 957, 967.)

A. ECONOMIC LOSS RULE

“Economic loss consists of damages for inadequate value, costs of repair and replacement of the defective product or consequent loss of profits—without any claim of personal injury or damages to other property. Simply stated, the economic loss rule provides: where a purchaser's expectations in a sale are frustrated because the product he bought is not working properly, his remedy is said to be in contract alone, for he has suffered only ‘economic’ losses.’ This doctrine hinges on a distinction drawn between transactions involving the sale of goods for commercial purposes where economic expectations are protected by commercial and contract law, and those involving the sale of defective products to individual consumers who are injured in a manner which has traditionally been remedied by resort to the law of torts. The economic loss rule requires a purchaser to recover in contract for purely economic loss due to disappointed expectations, unless he can demonstrate harm above and beyond a broken contractual promise. Quite simply, the economic loss rule prevent[s] the law of contract and the law of tort from dissolving one into the other. (Robinson Helicopter Co., Inc. v. Dana Corp. (“Robinson”) (2004) 34 Cal.4th 979, 988, internal quotation marks and citations omitted.)

Defendant Ford Motor Company (Defendant) demurrers to the fourth cause of action for concealment on the grounds that the claim is barred by the economic loss rule. (Demurrer at p. 17.)

However, “‘tort damages have been permitted in contract cases . . . where the contract was fraudulently induced.” (Robinson, supra, 34 Cal.4th at p. 990.) As Plaintiff alleges that the purchase of the vehicle was the product of fraudulent concealment, the economic loss rule does not apply. (FAC ¶ 138.)

Defendant argues that something more than nonperformance of the warranty is necessary to prove fraudulent intent, citing Food Safety Net Services v. Eco Safe Systems USA, Inc. (2012) 209 Cal.App.4th 1118, 1126. (Demurrer at p. 17.) But that case addressed an evidence-based motion for summary judgment, not the allegations required to support the existence of fraudulent intent upon demurrer.

Nor does Defendant’s authority support application of the economic loss rule to a claim for negligent repair. Defendant’s chief authority for this proposition — Sheen v. Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905, 933 — held for the proposition that a plaintiff in a loan contract with a bank could not recover in tort for the bank’s negligent failure to process a loan modification application. The court compared the situation to two other circumstances in which recovery had been allowed in tort despite the existence of a contractual relationship — the insurance context and contracts for the provision of “certain kinds of professional services” — and found them inapposite, given the unique posture of insurance companies toward their insureds and the “indeterminateness and breadth” of the duty that the plaintiff there sought to impose. (Sheen, supra, 17 Cal.5th at pp. 639–640.) This case acknowledged the availability of tort remedies “to ensure the consumer receives the benefits or services for which he or she has contracted.” (Id. at p. 932.) This case says little to foreclose a consumer from seeking tort recovery against a mechanic who negligently fails to repair a vehicle. And although Defendants cite federal cases in their favor, other federal cases disagree with their position. (See Sabicer v. Ford Motor Company (C.D. Cal. 2019) 362 F.Supp.3d 837, 841.)

Thus the economic loss rule does not bar either claim.

A. ELEMENETS & SPECIFICITY

The elements of fraud are: (1) misrepresentation or concealment, (2) knowledge of its falsity, (3) intent to defraud, (4) justifiable reliance and (5) resulting damage. (Gil v. Bank of America, Nat. Ass'n (2006) 138 Cal. App. 4th 1371, 1381; Barbara A. v. John G. (1983) 145 C.A.3d 369, 376.)

“‘The required elements for fraudulent concealment are (1) concealment or suppression of a material fact; (2) by a defendant with a duty to disclose the fact to the plaintiff; (3) the defendant intended to defraud the plaintiff by intentionally concealing or suppressing the fact; (4) the plaintiff was unaware of the fact and would not have acted as he or she did if he or she had known of the concealed or suppressed fact; and (5) plaintiff sustained damage as a result of the concealment or suppression of the fact. [Citation.]’ [Citation.]” (Hambrick v. Healthcare Partners Medical Group, Inc. (2015) 238 Cal.App.4th 124, 162.) The elements of concealment, as with ordinary fraud, must be pleaded with specificity. (See Cansino v. Bank of America (2014) 224 Cal.App.4th 1462, 1472.) Fraud causes of action must be pleaded with particularity, meaning that the plaintiff must allege “how, when, where, to whom, and by what means the representations were tendered.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.)

Defendant argues that Plaintiff fails to adequately plead the existence of a defect, but instead pleads the defect only by reference to a collection of symptoms. (Demurrer at p. 11.) Defendant presents no authority that the existence of a defect cannot be pleaded in this way, and once more cites to case authority applicable to the sufficiency of evidence to support a verdict, rather than what is necessary to support a pleading. (Demurrer at p. 11, citing Santana v. FCA US, LLC (2020) 56 Cal.app.5th 334, 345.)

Defendants argue that there was no transactional relationship between the manufacturer and Plaintiffs such that Defendants owed a duty to disclose the alleged defect. (Demurrer at pp. 13–14; see Bigler-Engler v. Breg, Inc. (2017) 7 Cal.App.5th 276, 312 [transaction giving rise to duty to disclose “must necessarily arise from direct dealings between the plaintiff and the defendant; it cannot arise between the defendant and the public at large”].) But such a relationship exists here. Although Plaintiffs do not allege that they purchased their vehicle from Defendant, it was Defendant that provided them with the warranty that they are here alleged to have breached. (Complaint ¶ 9.) Thus a transactional relationship is alleged.

Despite Defendant’s argument to the contrary, Plaintiffs also adequately allege a duty to disclose based on Defendants’ exclusive knowledge of the defect. (Demurrer at pp. 14–16.) There are “four circumstances in which nondisclosure or concealment may constitute actionable fraud: (1) when the defendant is in a fiduciary relationship with the plaintiff; (2) when the defendant had exclusive knowledge of material facts not known to the plaintiff; (3) when the defendant actively conceals a material fact from the plaintiff; and (4) when the defendant makes partial representations but also suppresses some material facts.” (Heliotis v. Schuman (1986) 181 Cal.App.3d 646, 651.)

To plead that a defendant had a duty to disclose a material fact, a plaintiff must allege that “the defendant has exclusive knowledge of material facts not known or reasonably accessible to the plaintiff.” (See Collins v. eMachines, Inc. (2011) 202 Cal.App.4th 249, 255.) The FAC alleges that Defendant acquired exclusive knowledge of the defect through the vehicle’s pre-release testing data and failures. (FAC ¶ 25.) Defendant’s authority for the proposition that this allegation of knowledge is inadequate comes from non-binding federal district cases applying federal standards of pleading not applicable to this court. (Demurrer at p. 15, citing Roe v. Ford Motor Company (E.D. Mich., Aug. 6, 2019, No. 218CV12528LJMAPP) 2019 WL 3564589, at p. •2.)

Defendants finally argue that Plaintiffs do not plead damages resulting from the negligent repair of their vehicle. (Demurrer at p. 20.) But the Complaint alleges that the negligent repair caused Plaintiffs’ damages. (FAC ¶ 127.) Although Defendants argue that other allegations in the Complaint imply that all repairs were under warranty and therefore likely caused Plaintiffs no out of pocket expenses, the truth or falsity of Plaintiffs’ damage allegations is not the proper subject of a motion on the pleadings. (Gerawan Farming, Inc., supra, 24 Cal.4th at pp. 515–516.)

The demurrer is therefore OVERRULED.