Judge: Mark A. Young, Case: 22SMCV01940, Date: 2024-11-13 Tentative Ruling

Case Number: 22SMCV01940    Hearing Date: November 13, 2024    Dept: M

CASE NAME:             Polone, et al., v. Shawmut Woodworking & Supply Inc., et al. 

CASE NO.:                22SMCV01940

MOTION:                     Demurrer to the Third Amended Complaint  

HEARING DATE:   11/13/2024

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.)  

“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 Shawmut Woodworking & Supply Inc. demurs to the first cause of action for fraud and second cause of action for negligence misrepresentation in Plaintiff Gavin Polone’s Third Amended Complaint (“TAC”).

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 concerning the misrepresentation, including Schram’s authority to speak on behalf of Shawmut at the time of the representations. As set forth below, the TAC alleges sufficient facts concerning Schram’s authority and representations.

The TAC establishes Schram’s authority to speak on behalf of Shawmut. Schram was acting as an employee of Shawmut and made the subject misrepresentations pursuant to that employment. (TAC ¶¶ 10, 17, 21.) Further, Schram had authority to speak on behalf of Shawmut as a “Project Executive” for Shawmut. (¶ 17.) Schram became a Project Executive for Shawmut by no later than January 11, 2018, though the TAC alleges that his agency begun before that date. (TAC ¶ 17.)

The TAC also demonstrates that Schram made specific misrepresentations which induced Plaintiff into signing the subject construction contract with Shawmut. In December 2017, Schram informed Plaintiff 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.” (TAC ¶¶ 15-16.) The TAC adds that that in Spring 2018, Plaintiff had numerous calls and in-person meetings with Schram where he repeated these representations. (¶ 15.) Such communications occurred after January 11, 2018, but before signing the agreement in May 2018.  (TAC ¶¶17-19.) Plaintiff recalls that the foregoing information was conveyed orally but does not recall whether it was a phone call or in-person. (Id.) Thus, the TAC establishes when the misrepresentations were made, and that they were made orally, via telephone or in person with Schram. Further details on the representation may be explored through discovery.

These allegations establish Schram was Shawmut’s agent in December 2017 when he made the initial misrepresentations, considering their pending deal and that Schram was moving his business to Shawmut at this time. This is true even if he had not become a “project executive” until January 2018. Even ignoring this, the newly added facts show that Schram made the same misrepresentations in Spring 2018, when Schram indisputably had authority to speak for Shawmut. These additional allegations are not “sham” allegations that are contradicted by the prior pleadings and must be accepted as true for the purpose of this demurrer.

Accordingly, the demurrer is OVERRULED.  Defendant to file an answer within 20 days.