Judge: Mark A. Young, Case: 21SMCV01001, Date: 2023-06-20 Tentative Ruling
Case Number: 21SMCV01001 Hearing Date: June 20, 2023 Dept: M
CASE NO.: 21SMCV01001
MOTION: Demurrer
to the Second Amended Complaint
HEARING DATE: 6/20/2023
Legal
Standard
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. 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. (CCP §§
430.30, 430.70.) At the pleading stage, a plaintiff need only allege ultimate
facts sufficient to apprise the defendant of the factual basis for the claim
against him. (Semole v. Sansoucie
(1972) 28 Cal. App. 3d 714, 721.) A “demurrer does not, however, admit
contentions, deductions or conclusions of fact or law alleged in the pleading,
or the construction of instruments pleaded, or facts impossible in law.” (S. Shore Land Co. v. Petersen
(1964) 226 Cal.App.2d 725, 732, internal citations omitted.)
A
special demurrer for uncertainty is disfavored and will only be sustained where
the pleading is so bad that defendant cannot reasonably respond—i.e., cannot
reasonably determine what issues must be admitted or denied, or what counts or
claims are directed against him/her. (CCP § 430.10(f); Khoury v. Maly’s
of Calif., Inc. (1993) 14 Cal.App.4th 612, 616.) Moreover, even if
the pleading is somewhat vague, “ambiguities can be clarified under modern
discovery procedures.” (Ibid.)
“Liberality in permitting amendment
is the rule, if a fair opportunity to correct any defect has not been given.” (Angie
M. v. Superior Court (1995) 37 Cal.App.4th 1217, 1227.) It is an abuse of
discretion for the court to deny leave to amend where there is any reasonable
possibility that plaintiff can state a good cause of action. (Goodman v.
Kennedy (1976) 18 Cal.3d 335, 349.) The burden is on plaintiff to
show in what manner plaintiff can amend the complaint,
and how that amendment will change the legal effect of the
pleading. (Id.)
Analysis
Defendant demurs to the fraud-based
causes of action of the second amended complaint (SAC). He argues that the third
and fifth causes of action for fraud and negligent misrepresentation are not
pled with sufficient specificity and merely restate the first cause of action
for breach of contract, attempting to convert what is at most a claim for
breach of the Power of Attorney (POA into a tort.
Plaintiff argues that the SAC
clearly alleges that Defendant induced Plaintiff to enter into a written
agreement by providing her personal and professional assurances regarding Defendant's
POA, upon which Plaintiff justifiably relied. Plaintiff emphasizes that
Defendant misrepresented his intent to abide by the terms of the POA upon
entering into the agreement, utilizing his influence as Plaintiff’s attorney and
friend to induce her into relying on his assurances that he would care for her
assets while she was incarcerated, when he clearly had no intent to do so,
exacerbates the claim for breach int one of fraud.
The SAC meets the pleading
standards of fraud. 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.)
“An action for promissory fraud may
lie where a defendant fraudulently induces the plaintiff to enter into a
contract.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638 [employee
being fraudulently induced to undertake employment based on verbal
representations of continued employment, the company's strong financial base and
pay raises, which the employer's agents knew to be false when making them]; see
Civ. Code § 1710(4) [deceit includes “[a] promise, made without any intention
of performing it”].) “A cause of action for a false promise should plead facts
to show the existence of two specific intentions of the promisor: an intention
to cause the promisee to act by reason of the promise, and an intention at the
time of the promise not to keep it.” (Hills Transportation Co. v. Southwest
Forest Industries, Inc. (1968) 266 Cal.App.2d 702, 708.)
Negligent misrepresentation
requires the defendant to make false statements believing them to be true, but
without reasonable ground for such belief. (Bily v. Arthur Young & Co. (1992)
3 Cal.4th 370, 407.) The elements of negligent misrepresentation are: (1)
misrepresentation of a past or existing material fact, (2) without reasonable ground
for believing it to be true, (3) with intent to induce another’s reliance on
the fact misrepresented, (4) ignorance of the truth, (5) justifiable reliance
on the misrepresentation by the party to whom it was directed, and (6)
resulting damage. (Hydro-Mill Co.,
Inc. v. Hayward, Tilton & Rolapp Ins. Associates, Inc. (2004) 115
Cal.App.4th 1145, 1154.) “As is true of
negligence, responsibility for negligent misrepresentation rests upon the
existence of a legal duty, imposed by contract, statute or otherwise, owed by a
defendant to the injured person.” (Eddy
v. Sharp (1988) 199 Cal.App.3d 858, 864.)
Causes for fraud, including
negligent misrepresentation, must be pled with specificity. (Small v. Fritz
Companies, Inc. (2003) 30 Cal.4th 167, 184.) “The particularity demands
that a plaintiff plead facts which show how, when, where, to whom, and by what
means the representations were tendered.” (Cansino v. Bank of America
(2014) 224 Cal.App.4th 1462, 1469.)
First, the SAC meets the heightened
pleading standard. Plaintiff alleges that in 2015 she granted power of attorney
to Gutsue to care for and guard her pet, car, personal and real property, and
other assets, while she was in prison. (SAC, ¶¶ 8-12, Ex. A.) Upon her release
from prison, in 2019, she found that Gutsue had mismanaged, sold, damaged, or
stolen her property. (¶¶ 13-15 & Ex. B.) The SAC includes a long list of
property that Gutsue supposedly lost, damaged, or stole when Plaintiff was in
prison. (¶¶ 12-15, Ex. B.)
Before entering into the POA, the
SAC alleges that Gutsue falsely represented to Plaintiff that he would honor
the POA, on which representations Plaintiff reasonably relied. (SAC ¶ 16.) Specifically,
the SAC alleges the following misrepresentations:
43. [O]n or
about the middle of June, BORISON spoke with GUTSUE by ask[ing] him if
he would be willing to administer her finances and personal assets while she
was in prison. Prior to GUTSUE entering into the agreement and executing a
Power of attorney (EXHIBIT A), GUTSUE represented to Plaintiff that he
will take care and preserve of all her personal property- the various valuables
possessions and assets… while she was to be incarcerated, with the objective of
maintaining all these items using the accounts and monies plaintiff had left in
GUTSUE… GUTSUE communicated that he would perform diligently and in good
faith, and to take custody, possession and/or control to manage and preserve
all plaintiff's personal property… BORISON specifically requested and GUTSUE specifically[]
promised to keep the credit cards safe and to keep making the minimum
payment each month on| behalf of BORISON. […] GUTSUE promised to close
the account at Bank of America and instead [] the account was used by GUTSUE or
GUTSUE’s family and friends in Santa Monica, while Plaintiff was in prison. […]
GUTSUE promised to relocate the dog according to Plaintiff instructions. Many
of these representations and promised were memorialized in a list of “things to
do” as a part of their Power of Attorney agreement… [On July 10, 2015], they
met at Marie Callender’s located at 14743 Ventura Blvd., Sherman Oaks, CA
91403. There, GUTSUE renewed one more time the specific promises and
assurances reported above and memorialized in the document of August 8 2015.
GUTSUE renewed his will to take care of BORISON’s personal asset and use
the asset in BORISON’s exclusive behalf and interest. GUTSUE promised that the
dog would be taken care and sent to Pittsburgh. There are no doubts that GUTSUE
made specific representations and promises to GUTSUE by phone and in person at
his home-office during the month of June, and at Marie Callender’s on July 10,
2015... These representations were made with the purpose of gaining
access and control of BORISON finances and induce BORISON to entrust GUTSUE
with her assets through a Power of Attorney… GUTSUE specifically
promised to use the funds in the exclusive interest of BORISON and to
refrain from self-dealing[.]
(SAC ¶ 43, emphasis added.)
Defendant also “agreed to [1] make
the interest payment or pay off and pull out her valuables from Beverly Loan, [2]
make payments on Plaintiff’s storage unit, [3] pay the interest on Plaintiff’s
bank accounts, [4] utilize the [POA] in an honest and responsible manner over
the funds she provided to him, [5] efficiently maintain defendant’s assets and
valuable personal property in storage[,] and [6] pay off and pull out the
valuable with Beverly Loan. (SAC ¶45.)
The SAC references the POA terms
and a secondary “to-do” list. On August 8, 2015, Plaintiff handed Defendant a
typed list of things they previously discussed in June and July about the POA
agreement. The list includes the following things which Defendant was to do: 1)
to send JoJo back to Pittsburgh, PA, in a careful and particular manner; 2) to
pay minimum amounts due on all her credit cards and secure all her credit cards
and debit cards; 3) to keep the Cathay Bank account open, and to not remove her
valuables from her safe deposit box, which had jewelry and $7,000.00 in cash kept
therein; 4) to close her business account with Bank of America; 5) to keep
plaintiff's P.O. Box in Winnetka paid so it stays open; 6) to pay plaintiffs
storage unit in Chatsworth, CA; 7) to tend her money as she requests; 8) to
close her Entertainment Credit Union account; and 9) to either pay the monthly
interest or take all her expensive items out of Beverly Loan. (SAC ¶ 46.) Defendant
promised to diligently exercise his powers under the Power of Attorney
agreement provided to him and accepted by him, for the benefit of Plaintiff as
agreed, and in keeping the assets of the Plaintiff separate from his own. (SAC
¶ 47.)
The SAC pleads the elements of fraud
with specificity. With the above allegations, Plaintiff provides allegations
which establish as a matter of fact that in June and July, and more
specifically July 10, 2015, Gutsue made specific representations “by phone” and
“in person” to Plaintiff at specified addresses and locations. The SAC also meets
the remaining factual elements of fraud. The SAC alleges that Defendant had the
specific intent not to perform on these agreements, and for Plaintiff to rely
on his misrepresentations to allow him access to her belongings. Defendant “had
no intentions to follow-thru with the representations and promises which he
made to plaintiff to use plaintiff's bank deposits (and other monies) she paid
him for the best interest of plaintiff, and not for himself.” (SAC ¶ 52, at p.
18:19-25.) His “real intentions were to flagrantly spend BORISON’s money
contrary to the purpose of the power attorney agreement[.]” (¶ 52, at p.
19:5-6.) Plaintiff alleges that Gutsue was her lawyer, trusted advisor, and
friend, so that a fiduciary relationship existed between them. (¶ 12.)
Plaintiff reasonably relied on his assurances. (¶ 16.) Plaintiff would not have
agreed to the agreement if she knew that Defendant was intending to breach the
agreement. (¶ 16.) These averments are sufficient to meet the heightened
pleading standards of fraud and negligent misrepresentation.
Defendant also asserts that this only re-states the breach of contract
cause of action. Defendant argues that tort remedies should be limited
to situations where “the conduct in question is so clear in its deviations from
socially useful business practices that the effect of enforcing such tort
duties will be . . . to aid rather than discourage commerce.” (Erlich v.
Menezes (1999) 21 Cal.4th 543, 550-554 [holding conduct amounting to a
breach of contract becomes tortious only when it also violates a duty
“independent of the contract arising from principles of tort law”].) Erlich
holds that a fraudulent inducement of the contract violates an duty independent of the contract.
(Id. at 551-52.; see Robinson
Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 988-993 [economic loss rule did not bar claims
for intentional misrepresentation because the causes were independent of the
breach of contract claim].) The SAC pleads intentional misrepresentations with
the intent to induce Plaintiff into the POA agreement. The SAC thereby pleads a
duty outside of mere contract. If proven, Plaintiff may recover damages in
tort.
Accordingly, Defendants’ demurrer is OVERRULED.