Judge: Mark A. Young, Case: 22SMCV01940, Date: 2023-08-25 Tentative Ruling
Case Number: 22SMCV01940 Hearing Date: March 6, 2024 Dept: M
CASE NAME: Polone v.
Shawmut Woodworking & Supply Inc., et al.
CASE NO.: 22SMCV01940
MOTION: Demurrer
to the Second Amended Complaint
HEARING DATE: 3/6/24
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
Plaintiff’s request for judicial notice is GRANTED. (Evid. Code §
452(d).)
Defendant Shawmut Woodworking & Supply Inc. demurs to the first and
second causes of action of Plaintiff Gavin Polone’s Second Amended Complaint
(SAC), for fraud and negligent misrepresentation.
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) 145Cal.App.4th 170, 184.)
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.) “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.)
In California, 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.) “[I]n the case of a
corporate defendant, the plaintiff must allege the names of the persons who
made the representations, their authority to speak on behalf of the
corporation, to whom they spoke, what they said or wrote, and when the
representation was made.” (West v. JPMorgan Chase Bank, N.A. (2013) 214
Cal.App.4th 780, 793.)
Following the prior demurrer, the Court granted leave for Plaintiff to
allege additional facts regarding the misrepresentations for fraud in the inducement
of the Standard Form of Agreement Between Owner and Contractor AIA A103-2007
(the “Contract”) and General Conditions A201-2007, dated March 13, 2018 (the
“General Conditions” and collectively, the “Agreement”). Specifically, the
Court found that the heightened pleading standard was not met because the FAC
did not allege where and by what means Schram’s alleged representations were
made and did not allege Schram’s agency authority to make such representations
on behalf of Shawmut. The SAC does not address two of the issues the Court
raised in the prior demurrer.
Both complaints allege the timing
and substance of the representations, that in “December 2017” Schram represented
that he “was selling his construction company to a larger commercial
contracting firm based in Boston called Shawmut… that he was staying on after
the sale and would still directly supervise the Project… Polone would need to sign
a contract with Shawmut rather than Winters-Schram… using Shawmut would be good
for Polone because Polone would get a much larger company (Shawmut) with all of
its resources behind the Project and Mr. Schram would still be running it.”
(SAC ¶¶ 15-16.) However, the SAC still does not allege where, how and by what means the
representations were made. Are these representations written or oral? Where
were these representations made? These facts must be alleged to meet the
heightened pleading standard for fraud. While
these allegations are not present in the SAC, these deficiencies are the type
that, in general, can be cured through amendment.
The SAC does allege new facts concerning Schram’s agency. The SAC now establishes
Schram’s agency with Shawmut, such that the representations may be imputed to
Shawmut. Specifically, the SAC alleges that Schram was acting as an employee of
Shawmut and made the above misrepresentations pursuant to that employment. (SAC
¶¶ 10, 17, 21.) Defendant notes that the facts suggest that Schram made
the statements to Polone before he was hired by Shawmut. Indeed, the SAC
alleges that Mr. Schram became a Project Executive for Shawmut by no later than
January 11, 2018, which is a month after the representations. (¶17.) Considering this statement, further facts are
needed to explain Schram’s authority at the time the representations were made
in December 2017.
Otherwise, the Court would find the two causes of action well-pled. Defendant
argues that the fraud cause of action fails to plead damages resulting from the
representations. However, the SAC alleges that but for the representations,
Plaintiff entered into the agreement with Shawmut. (SAC ¶¶ 19, 87.) Even though
Schram left the firm, Plaintiff was bound to fund the project with Shawmut, incurring
over $3 million in damages related to overcharges for incompetent supervision,
consultant costs, delay costs (including, without limitation, carrying costs
and expenses for the Property), costs to repair defective construction arising
from poor supervision, and loss of use of the Property. (Id.) Thus, damages are
pled.
Defendant also contends that the economic loss rule would bar the causes
of action. However, case law recognizes fraudulent inducement as an exception
to the ELR. (Erlich v. Menezes (1999) 21 Cal.4th 543, 551-52.) Thus, if
Plaintiff successfully pleads the fraudulent inducement theory, the economic
loss rule would not bar the cause of action.
Accordingly, the demurrer is SUSTAINED with 10 days leave to amend.