Judge: Mark A. Young, Case: 22SMCV00364, Date: 2024-06-11 Tentative Ruling
Case Number: 22SMCV00364 Hearing Date: June 11, 2024 Dept: M
CASE NAME: Wiliams v. Hudson
CASE NO.: 22SMCV00364
MOTION: Demurrer to the
Complaint
HEARING DATE: 6/11/2024
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.)
Any party, within the time allowed to
respond to a pleading may serve and file a notice of motion to strike the whole
or any part thereof. (CCP § 435(b)(1); Cal. Rules of Court, Rule 3.1322(b).)
The court may, upon a motion or at any time in its discretion and upon terms it
deems proper: (1) strike out any irrelevant, false, or improper matter inserted
in any pleading; or (2) strike out all or any part of any pleading not drawn or
filed in conformity with the laws of California, a court rule, or an order of
the court. (CCP §§ 436(a)-(b); Stafford v. Shultz (1954) 42 Cal.2d 767,
782 [“Matter in a pleading which is not essential to the claim is surplusage;
probative facts are surplusage and may be stricken out or disregarded”].)
“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 James Hudson demurs to each cause of action of
Plaintiff Gwenique Williams’s Complaint, and moves to strike punitive damages,
treble damages, and attorneys’ fees.
Rescission of Contract (Mistake of Fact)
Defendant
asserts that the rescission cause of action for mutual mistake of fact fails
because the Complaint does not identify how the parties could have
possibly omitted the precondition of inspection from the terms of the written
contract and does not show Plaintiff reasonably relied on any representations
considering the written contract was an “as-is” deal.
To
state a claim for rescission on the basis of mutual mistake, a plaintiff must
allege that the parties were both mistaken as to a material fact underlying the
agreement at issue. (Civ. Code 1689.) A mistake of fact is “[a]n unconscious
ignorance or forgetfulness of a fact past or present, material to the contract”
and cannot be caused by the neglect of a legal duty on the part of the person
making the mistake. (Civ. Code §1577;
see Van Meter v. Bent Construction Co. (1956) 46 Cal. 2d 588, 594-595
[mere negligence will not bar a claim of mutual mistake; only gross negligence
or "preposterous or irrational" conduct will preclude a finding of
mistake].)
To
plead the existence of a mistake of fact to obtain rescission of a contract, a
party must plead the following: “(1) the [party] made a mistake regarding a
basic assumption upon which the [party] made the contract; (2) the mistake has
a material effect upon the agreed exchange of performances that is adverse to
the [party]; (3) the [party] does not bear the risk of the mistake; and (4) the
effect of the mistake is such that enforcement of the contract would be
unconscionable.” (Donovan v. RRL Corp., (2001) 26 Cal. 4th 261, 282.) “A
party bears the risk of a mistake when [¶] (a) the risk is allocated to him by
agreement of the parties, or [¶] (b) he is aware, at the time the contract is
made, that he has only limited knowledge with respect to the facts to which the
mistake relates but treats his limited knowledge as sufficient, or [¶] (c) the
risk is allocated to him by the court on the ground that it is reasonable in
the circumstances to do so.” (Id. at 283.) Further, to pass a general demurrer,
a complaint must allege the “facts showing how, when and why the mistake
occurred.” (McClure v. Cerati (1948) 86 Cal. App. 2d 74, 82.)
The
Complaint fails to allege an unconscious ignorance or forgetfulness of a fact
past or present material fact, or how logically such a mistake occurred under
the pled facts. The subject agreement was for the sale on October 15, 2021, of
a 42-foot motor yacht with the purchase price of $140,000. (Compl., ¶¶ 6-7, Ex.
A.) The Agreement unambiguously recites that Plaintiff had examined and tested
the vessel prior to purchase. (Id.) Plaintiff, however, contends that this was not
the case, and she did not examine or test the vessel before signing. (¶ 8.)
Further, prior to the execution of the sales agreement, Hudson represented that
the value of the vessel was $140,000. (¶ 9.) Plaintiff allegedly relied upon
Hudson’s representations in setting the price. (Id.) Plaintiff further alleges
that her “acceptance of the Vessel and the closing of the purchase transaction
were contingent upon the results of the ‘examination’ and ‘testing’ recited in
the Sale Agreement.” (Id.) The complaint further explains that, although not
mentioned in the sales agreement, Hudson requested $35,000 as a deposit to
allow access to the vessel for examination and testing. (¶ 10.) On October 18,
2021, Plaintiff hired a marine inspector, who examined the vehicle and
determined that the fair market value was $80,000, not $140,000. (¶ 11.) Plaintiff
rejected the vessel and asked for the return of the $35,000 deposit on October
21, 2021. (Id. ¶ 12.) Hudson initially agreed to return the deposit in stages
within three months, but Hudson failed to return any portion of the deposit. (Id.)
The
Complaint specifically identifies the mistake as the fact the Agreement failed
to express the true intention of the parties, i.e., that Plaintiff had not already
“fully examined and tested the Vessel” and “failed to accurately reference the
agreed-upon future inspection of the Vessel.” (Compl., ¶¶ 14, 15.) The
complaint, however, admits that “Both Parties were aware that this was a
misstatement and that Plaintiff had not, in fact, ‘fully examined and tested
the Vessel’ prior to the drafting and execution of the Sale Agreement.” (Id.) Plaintiff
was therefore aware that the agreement did not accurately reference the
agreed-upon future inspection. Since Plaintiff admits she was aware of the
misstatement, Plaintiff cannot claim the misstatement was an “unconscious
ignorance or forgetfulness of a fact” required for recission by mutual mistake.
Additionally,
the written agreement expressly allocated the risk to Plaintiff. The vessel here was expressly sold “as-is”
without any express or implied warranties as to the merchantability or fitness.
(Civ. Code §§ 1791.1-1791.3, 1792.3.) Generally, any waiver by the buyer of
consumer, except as expressly provided by statute, will be deemed contrary to
public policy and unenforceable/void. (Civ. Code § 1790.1.) A buyer cannot
waive the implied warranty of merchantability or fitness “except in the case of
a sale of consumer goods on an ‘as is’ or ‘with all faults’ basis where the
provisions of this chapter affecting ‘as is’ or ‘with all faults’ sales are
strictly complied with.” (Civ. Code § 1792.3.) In order to waive the implied
warranties, there must be a “conspicuous writing is attached to the goods which
clearly informs the buyer, prior to the sale, in simple and concise language of
each of the following: (1) The goods are being sold on an “as is” or “with all
faults” basis. (2) The entire risk as to the quality and performance of the
goods is with the buyer. (3) Should the goods prove defective following their
purchase, the buyer and not the manufacturer, distributor, or retailer assumes
the entire cost of all necessary servicing or repair.” (Civ. Code § 1792.4.) If
so, then implied warranties are waived. (Civ. Code § 1792.5.)
Here, the Bill of Sale unambiguously provides
such a disclaimer:
“Seller sells and delivers the boat
in good working condition and buyer accepts the Boat on an "AS IS"
basis. Seller explicitly disclaims all warranties, whether expressed or
implied, including, but not limited to, any warranty as to the condition of the
Boat. However, Seller's above warranty disclaimer does not affect the terms of
any applicable warranties from the manufacturer of the Boat. Seller makes no
other representation or warranty with respect to the Boat or its condition or
performance and there are no other warranties implied.
Buyer warrants to Seller that Buyer
has fully examined and tested the Boat, that Buyer is purchasing the Boat in
reliance upon such examination and testing, and that Buyer is fully satisfied
with the Boat "AS IS". On the alternative, and at the very
least, Buyer warrants having inspected the Boat. Moreover, Buyer has accepted
the Boat in its existing condition.”
(Compl., Ex. A.)
The
above disclaimer shows that the vessel was bought “as is.” The phrase “as is”
is stated multiple times, bolded and capitalized. Defendant expressly
disclaimed all warranties as to the condition of the Boat and made “no other
representation or warranty with respect to the Boat or its condition or
performance.” Defendant clearly and in plain language disclaimed any “warranty” by him as to the condition of the
vessel. Conversely, Plaintiff warranted that she purchased the vessel in
reliance upon her own examination and testing, that she was fully satisfied with
its existing condition. Thereby, Plaintiff expressly took on any risk associated
with the future performance of the vessel. This issue provides an independent
basis to sustain the demurrer.
Plaintiff failed to plead a mistake of
fact concerning her right to inspection. Further, Plaintiff affirmatively pled
that she bore the risk of any mistake concerning the inspection or condition of
the vessel. Accordingly, Defendant’s demurrer is SUSTAINED without leave to amend. Leave will only be granted if Plaintiff demonstrates in what manner¿she
can amend the complaint, and¿how¿that amendment will save the claim considering
the above discussion.
Fraud
Defendant argues that the fraud cause of action fails to allege an
actionable misrepresentation, or Plaintiff’s reasonable reliance thereon. 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.) In
California, fraud 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.)
Expressions
of opinion are not generally treated as representations of fact, and thus are
not grounds for a misrepresentation cause of action. (Neu-Visions Sports,
Inc. v. Soren/McAdam/Bartells, (2000) 86 Cal. App. 4th 303, 308.) Exceptions
exist where a statement,
“although in the form of an opinion, is 'not a casual expression of belief' but
'a deliberate affirmation of the matters stated’… Moreover, when a party
possesses or holds itself out as possessing superior knowledge or special
information or expertise regarding the subject matter and a plaintiff is so
situated that it may reasonably rely on such supposed knowledge, information,
or expertise, the defendant's representation may be treated as one of material
fact.” (Bily v. Arthur Young & Co. (1992) 3 Cal.4th 370, 408.)
Plaintiff
alleges a single misrepresentation which she relied on to enter the sale
agreement, that Defendant “represented to Plaintiff that the fair market value
of the Vessel was $140,000.00.” (Compl., at ¶ 9.) Per the above caselaw, “[v]alue is
quintessentially a matter of opinion, not a statement of fact.” (Neu-Visions,
supra, at 310 [principal in accounting firm merely predicted what an
appraiser would value the property, which was deemed a non-actionable value
opinion]; Padgett v. Phariss (1997) 54 Cal.App.4th 1270, 1284 [summary
judgment is proper where representation was made as to the fair market value of
real property].) As such, Defendant’s representation of the fair market value
of the vessel was an opinion.
Plaintiff
has pled no facts showing that she could reasonably rely on this opinion, such
as facts showing this was not merely an expression of belief, or that Defendant
held himself out as an expert with specialized knowledge. Plaintiff merely
contends Defendant possessed superior
knowledge of the vessel as the owner. However, Plaintiff does not explain what
this superior knowledge would be, or how this would situate her such that it was
reasonable to rely on Defendant’s value assessment during an arms-length
business transaction. Moreover, the contract expressly disclaimed Plaintiff’s
reliance on anything but her own testing. Via the contract, Plaintiff expressed
that she “fully examined and tested the Boat, that [she] is purchasing
the Boat in reliance upon such examination and testing[.]” Therefore, the fraud
claim fails to state an actionable misrepresentation of fact.
Furthermore,
Plaintiff fails to plead reasonable reliance. “The reasonableness of the
reliance is ordinarily a question of fact. However, whether a party's reliance
was justified may be decided as a matter of law if reasonable minds can come to
only one conclusion based on the facts.” (Guido v. Koopman (1991) 1
Cal.App.4th 837, 843, internal citations omitted.) Reasonableness of the
plaintiff's reliance is judged by reference to the plaintiff's knowledge and
experience, and whether circumstances were such to make it reasonable for
plaintiff to accept defendant's statements “without an independent inquiry or investigation.”
(OCM Principal Opportunities Fund, L.P. v. CIBC World Markets Corp.
(2007) 157 Cal.App.4th 835, 864.) In the context of fraud, as-is disclaimers will generally preclude
reasonable reliance on contrary oral representations. (Hinesley v. Oakshade
Town Ctr., (2005) 135 Cal. App. 4th 289 [while landlord’s agent made
misrepresentations of fact to prospective tenant, a clause in written lease
specifically precluding tenant's reliance on landlord's representations
regarding other prospective tenants in shopping center fully rebutted
justifiable reliance element of fraud]; cf. Edwards v. Centex Real Estate
Corp. (1997) 53 Cal.App.4th 15, 42 [parole evidence of misrepresentations
would only be permitted to demonstrate fraud when the plaintiff pleads fraud in
the inducement of a contract with an integration provision].) As noted above,
Plaintiff entered into the agreement on an “as-is” basis. Again, the contract
disclaimed Plaintiff’s reliance, stating that she “fully examined and
tested the Boat, that [she] is purchasing the Boat in reliance upon such
examination and testing[.]” (Compl., Ex. A.) Under such facts, Plaintiff’s reliance on contrary
representations would be unreasonable as a matter of law.
Accordingly,
the demurrer is SUSTAINED with leave to amend.
Conversion
Plaintiff fails to state a claim for
conversion in light of the contract terms.
To plead a cause of action for conversion, one must allege (1) the
plaintiff’s ownership or right to possession of personal property; (2)
defendant’s disposition of the property inconsistent with plaintiff’s rights;
and (3) resulting damages. (Fremont Indemnity Co. v. Fremont General Corp.
(2007) 148 Cal.App.4th 97, 119.) “‘Conversion is any act of dominion
wrongfully exerted over another’s personal property in denial of or
inconsistent with his rights therein.’” (Enterprise Leasing Corp. v. Shugart
Corp. (1991) 231 Cal.App.3d 737, 747.) “‘It is not necessary that there be
a manual taking of the property; it is only necessary to show an assumption of
control or ownership over the property, or that the alleged converter has
applied the property to his own use.’” (Id.) “A
‘generalized claim for money [is] not actionable as conversion.’” (PCO, Inc. v. Christensen, Miller, Fink,
Jacobs, Glaser, Weil & Shapiro, LLP (2007) 150 Cal.App.4th 384, 395.) “[A]ctions for the conversion of money have
not been permitted when the amount of money involved is not a definite sum.” (Id.
at 396.) “[M]oney can only be treated as specific property subject to being
converted when it is ‘identified as a specific thing.’” (Id.)
Plaintiff claims that Defendants have wrongfully
withheld the money she gave to Defendant pursuant to the agreement. Plaintiff
alleges that at the time of execution of the agreement, Defendants
demanded, and Plaintiff paid to Defendants, a purchase deposit (the “Deposit”)
in the amount of $35,000.00 to be paid toward the total Sale Price. (Compl., ¶
10.) Such a “Deposit” was not referenced at all in the Sale Agreement, but Defendant
advised Plaintiff that the Deposit was required to be paid before Defendants
would allow Plaintiff access to the Vessel for the purpose of examining and
testing the Vessel as called for in the Sale Agreement. (Id.) After learning
the true value of the vessel, Plaintiff notified Defendants that she was
rejecting the Vessel. (Id. ¶ 12.) On October 22, 2021, and numerous times
thereafter, Plaintiff demanded that Defendants return the Deposit funds to her.
(Id.) Defendants initially agreed to return the Deposit pursuant to a payment
plan calling for half of the amount to be paid immediately to Plaintiff, with
the balance paid over a three-month period thereafter. (Id.) However,
Defendants have since refused to return any portion of the Deposit to
Plaintiff. (Id.)
Plaintiff fails to allege her ownership or right
to possession of the cited funds. “[T]he law is well settled that there can be
no conversion where an owner either expressly or impliedly assents to or
ratifies the taking, use or disposition of his property.” (Farrington v. A.
Teichert & Son (1943) 59 Cal.App.2d 468, 474.) While a “deposit” was
not called for in the contract, the contract still requires that Plaintiff pay
$140,000.00 for the purchase of the Vessel. Plaintiff alleges that this
$35,000.00 payment was to be toward that sales price. As discussed above,
Plaintiff has not pled that this contract was invalid or otherwise
unenforceable. Plaintiff has not alleged any breach of the Agreement. Plaintiff
also has failed to plead the existence of any secondary contract for the return
of the deposit. (See Compl., ¶¶ 12, 24.) Therefore, on the facts of the
complaint, Plaintiff owes $105,000.00 to Defendant. Defendant’s
disposition of the funds is therefore consistent with Plaintiff’s rights under
the contract.
Accordingly,
the demurrer is SUSTAINED with leave to amend.
Good Faith and Fair Dealing
“Every contract imposes upon each party a
duty of good faith and fair dealing in its performance and its enforcement.” (Hicks
v. E.T. Legg & Associates (2001) 89 Cal.App.4th 496, 508.) “[T]he scope
of conduct prohibited by the covenant of good faith is circumscribed by the
purposes and express terms of the contract.” (Id. at 509.) “The
covenant of good faith and fair dealing . . . exists . . . to prevent one
contracting party from unfairly frustrating the other party’s right to receive
the benefits of the agreement actually made.” (Guz v. Bechtel National Inc.
(2000) 24 Cal.4th 317, 349.)
The elements for breach of the implied
covenant of good faith and fair dealing are: (1) existence of a contract
between plaintiff and defendant; (2) plaintiff performed his contractual
obligations or was excused from performing them; (3) the conditions requiring
defendant’s performance had occurred; (4) the defendant unfairly interfered
with the plaintiff’s right to receive the benefits of the contract; and (5) the
plaintiff was harmed by the defendant’s conduct. (Merced Irr. Dist. V.
County of Mariposa (E.D. Cal. 2013) 941 F.Supp.2d 1237, 1280 (discussing
California law).) Allegations must demonstrate defendant’s conduct for failure
or refusal to discharge contractual responsibilities was a conscious and
deliberate act, not an honest mistake, bad judgment or negligence. (Id.)
“‘[T]he implied covenant of good faith and fair dealing is limited to assuring
compliance with the express terms of the contract, and cannot be
extended to create obligations not contemplated by the contract.’” (Ragland
v. U.S. Bank Nat. Assn. (2012) 209 Cal.App.4th 182, 206.)
Plaintiff
fails to plead her own performance, or defendant’s unfair interference with the
rights under the contract. As noted, Plaintiff agreed to pay $140,000 to
Defendant for the Vessel. Pursuant to that Agreement, Defendant “delivered the
boat in good working condition and [Plaintiff] accepted the Boat on an ‘AS IS’
basis.” (Compl., Ex. A.) However, Plaintiff has admitted to tendering only
$35,000.00 of the $140,000.00 purchase price. (Compl., ¶ 10.) Therefore, she
has not substantially performed her sole obligation under the Agreement. As
such, Defendant also could not have unfairly interfered with Plaintiff’s rights
under the contract.
Accordingly,
the demurrer is SUSTAINED with leave to amend.
Declaratory Relief
Code of Civil Procedure section 1060
provides that a person may bring an action for declaratory relief if he or she
“desires a declaration of his or her rights or duties with respect to another,
or in respect to, in, over or upon property . . ..” To state a declaratory
relief claim, the plaintiff must allege a proper subject of declaratory relief
and 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.) While declaratory relief operates prospectively, a
proper action for declaratory relief can redress past wrongs. (Travers v.
Louden (1967) 254 Cal.App.2d 926, 931.)
Plaintiff alleges
that a controversy exists between the parties regarding entitlement to the
Deposit under the agreement. (Compl., ¶ 36.) Plaintiff seeks a judicial
determination of the rights and duties of the Parties under the Sale Agreement,
and a declaration to the effect that the unrestricted right of possession and
ownership of the Deposit vests in Plaintiff. (Compl., ¶ 37.)
This cause
rises and falls with the other causes of action. “In
general, if a complaint for declaratory relief alleges the existence of an
actual controversy . . . , the court should not sustain a general demurrer on
the theory that any declaration would necessarily be adverse to the plaintiff.”
(Teachers Management & Investment Cop. v. City of Santa Cruz (1976)
64 Cal.App.3d 438, 449.) “But if it is clear that the order
sustaining the demurrer amounted to a correct decision on the legal merits of
the case, a reversal is not required; instead, the appellate court may simply
modify the judgment so as to declare that plaintiff was entitled to no relief.”
(Id.) Here, Plaintiff has not pled sufficient facts to show she is
entitled to receive her deposit back.
Accordingly,
the demurrer is SUSTAINED with leave to amend.
The motion
to strike is MOOT pursuant to the ruling on demurrer.