Judge: Mark A. Young, Case: 23SMCV01916, Date: 2024-04-30 Tentative Ruling
Case Number: 23SMCV01916 Hearing Date: April 30, 2024 Dept: M
CASE NAME: Low, et al., v.
Spiegal, et al.
CASE NO.: 23SMCV01916
MOTION: Demurrer
and Motion to Strike the Complaint
HEARING DATE: 4/30/24
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.)
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 Sotheby’s International Realty and Joshua Spiegal (hereinafter,
the “Brokers”) demur to the third through tenth causes of action of the
complaint, and move to strike the requests for attorneys’ fees, restitution, and
punitive damages.
Third Cause of
Action for Civil Code section 2079
The Brokers assert that the section 2079 claim fails because it expressly
excludes searching public records by Defendants, and the Real Estate Purchase
Agreement (RPA) also expressly provides Defendants have no obligation to
inspect offsite or public records concerning use of the Property. Indeed, Civil Code section 2079 states:
(a) It is the duty of a real estate broker or
salesperson… to a prospective buyer of residential real property… to conduct a
reasonably competent and diligent visual inspection of the property offered for
sale and to disclose to that prospective buyer all facts materially affecting
the value or desirability of the property that an investigation would reveal…
The inspection to be performed
pursuant “does not include or involve an inspection of areas that are
reasonably and normally inaccessible to this type of
an inspection, nor an affirmative inspection of areas off the site of the
subject property or public records or permits concerning the title or use of
the property…” (Civ. Code § 2079.3.)
The Complaint arises from the sale of the real Property at 27927 Pacific
Coast Hwy, Malibu, 90265. Defendants Copley and Coldwell (“Realtors”) represented
Defendants Ferhad Sahebkar and Anjali Sharma (“Sellers”) in the sale of the
Subject Property. (Compl., ¶ 18.) The Subject Property is divided into a western
half and an eastern half. The western half had a house in disrepair and the
eastern half was undeveloped. (Compl., ¶20.) Plaintiffs planned on purchasing
the property and improving the undeveloped half. (Compl., ¶ 21.) Plaintiffs
retained the Broker Defendants (Spiegal/Sotheby’s) and Realtors (Copley/Coldwell)
as dual agents for the transaction. (Compl., ¶ 22.) On March 10, 2021,
Plaintiffs entered into a RPA to purchase the subject property. (Compl., ¶ 24.)
The complaint alleges that at some unspecified point during the escrow
period, Plaintiffs inquired whether there were any “laws, ordinances, or any
restrictions otherwise that would preclude the PLAINTIFF from developing the
majority of the Eastern Portion.” (Compl., ¶ 25.) The Realtors informed them
that certain areas in Malibu are designated as Environmentally Sensitive
Habitat Areas ("ESHA"), due to the presence of rare, threatened, or
endangered species or habitats that are ecologically important. (Id.) The Realtors
further advised that ESHA areas are protected by environmental regulations and
zoning ordinances to preserve the natural environment, and development
activities within them are subject to rigorous environmental review and
mitigation measures to minimize any negative impact. (Id.) Since development
was material to the transaction, Plaintiffs requested information from the Realtors
about any ESHA protections which might apply. (Compl., ¶ 26.) At some point
thereafter, the Realtors “advised the PLAINTIFFS that no ESHA protections or
regulations are applicable to the Subject Property, and that the PLAINTIFFS
would be entitled to develop it. (Compl., ¶ 27.) After the close of escrow, Plaintiffs
began to develop the Subject Property. (Compl., ¶ 29.) However, they soon
received notice from the City of Malibu that the Eastern Portion was designated
as an ESHA and therefore, development on this portion of the Subject Property
was not permitted. (Id.)
The complaint alleges that Realtors, on behalf of the Brokers, completed
an investigation of the Subject Property and discovered the facts that materially
affect the condition, value and/or desirability of the Subject Property but
failed to disclose the discovery of its inquiry to Plaintiffs, and/or they failed
to conduct a reasonable investigation of the Subject Property entirely.
(Compl., ¶ 59.) However, a visual
inspection would not tend to reveal ESHA protection status. This would
necessarily involve inspecting “public records or permits concerning the
title or use of the property . . ..” Based
on the plain language of the statutory scheme, the Brokers/Realtors did not
breach this statutory duty of a visual inspection and to reveal all known
material facts that a visual inspection would have revealed. Thus, the
complaint fails to state a cause of action under section 2079. Of course, this
is a separate duty that would not affect any duties to reveal known material
facts. (See Easton v. Strassburger (1984) 152 Cal.App.3d 90 [recognizing
that case law imposed a duty on sellers’ brokers to disclose material facts
“actually known” to the broker]; see Field v. Century 21 Klowden-Forness
Realty (1998) 63 Cal.App.4th 18, 24.)
Therefore, the demurrer to the
third cause of action is SUSTAINED without leave to amend.
Fourth Cause of
Action for UCL
Plaintiff fails to allege appropriate relief to support a UCL claim. Suits asserting
section 17200 claims are equitable actions and compensatory damages are not available.
(Feitelberg v. Credit Suisse First Boston, LLC (2005) 134 Cal.App.4th
997, 1009.) Prevailing plaintiffs are generally limited to injunctive relief
and restitution.” (Cel–Tech Communications, Inc. v. Los Angeles Cellular
Telephone Co. (1999) 20 Cal.4th 163, 179, 83 Cal.Rptr.2d 548, 973 P.2d 527;
§ 17203.) Accordingly,
the demurrer is SUSTAINED with leave to amend. Alternatively, the motion to
strike the damages request (¶ 69) is GRANTED.
Fraud-based
causes (Fifth through Tenth Causes)
While some of the causes of action herein are not styled as fraud, the
fifth through tenth causes of action all sound in fraud. The eighth cause of action is for negligence,
which is duplicative of the negligent misrepresentation action. (Compl., ¶
106.) Likewise, the breach of fiduciary duty causes of action (ninth and tenth)
are based on the same duties and breaches as the fraud causes of action.
(Compl., ¶¶ 114, 116.) Thus, the Court will analyze the causes together.
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, 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.) “[T]o establish fraud through nondisclosure
or concealment of facts, it is necessary to show the defendant ‘was under a
legal duty to disclose them.’” (OCM Principal Opportunities Fund v. CIBC
World Markets Corp. (2007) 157 Cal.App.4th 835, 845.) Nondisclosure or
concealment may constitute actionable fraud when there is a fiduciary
relationship between the parties, or other circumstances which show a duty to
disclose. (Los Angeles Memorial Coliseum Commission v. Insomniac, Inc.
(2015) 233 Cal.App.4th 803, 831.)
The complaint fails to plead fraud with specificity. The complaint
alleges active misrepresentations concerning the property’s ESHA protections.
(Compl., ¶¶ 25-27.) However, the complaint only alleges that Realtors “advised”
Plaintiffs that “no ESHA protections or regulations are applicable to the
Subject Property, and that the PLAINTIFFS would be entitled to develop it.”
(Compl., ¶ 27.) The complaint does not allege when the representations were
made, where they were made, to whom they were made, or how and by what means
the representations were made. The complaint also does not adequately address the
Realtors authority to make such representations on behalf of the Brokers.
As noted, the visual inspection
duty is separate from the duty to reveal known material facts.
(See Easton v. Strassburger (1984) 152 Cal.App.3d 90 [recognizing that
case law imposed a duty on sellers’ brokers to disclose material facts
“actually known” to the broker]; see Field v. Century 21 Klowden-Forness
Realty (1998) 63 Cal.App.4th 18, 24.) Thus, a duty to disclose could be
stated if Defendants were actually aware of the ESHA status.
Accordingly, the demurrer is SUSTAINED with leave to amend as to the
fifth through tenth causes of action.
Punitive Damages
As the demurrer was sustained with leave to amend, the motion to strike
punitive damages is moot.
Attorney Fees
The Brokers move to strike the attorneys’ fees request. They correctly
observe that they are not direct parties to the RPA. (Compl., Ex. A at 10.)
Moreover, there is no statute to authorize attorneys’ fees. (Civ. Code §§
1033.5(a)(10); 1717.) Thus, the motion
to strike is GRANTED.