Judge: Mark E. Windham, Case: 22STLC08091, Date: 2023-06-29 Tentative Ruling

Case Number: 22STLC08091    Hearing Date: April 11, 2024    Dept: 26

 

Peter Steigleder v. Garnik Badalyans

Plaintiff/Cross-Defendant’s Demurrer and Motion to Strike to Second Amended Cross-Complaint

(CCP § 430.10)

 

 

TENTATIVE RULING:

SUSTAIN without leave to amend.

 

            Plaintiff/Cross-Defendant Peter Steigleder’s Demurrer to the Second Amended Cross-Complaint is SUSTAINED in its entirety without leave to amend. As such, the Motion to Strike is denied as moot.Background:

 

Procedural History

            Plaintiff Peter Steigleder (Cross-Defendant) filed a Complaint alleging (1) breach of contract, (2) open book account, and (3) account stated against Defendant Garnik Badalyans (Cross-Complainant) on December 6, 2022. Cross-Complainant filed a Cross-Complaint for breach of contract, breach of the implied covenant of good faith and fair dealing, and fraud against Cross-Defendant, on January 20, 2023.

 

            On June 29, 2023, the Court sustained Cross-Defendant’s demurrer to the Cross-Complaint with leave to amend. (Minute Order, 06/29/23.) Cross-Complainant filed a First Amended Cross-Complaint (FAXC) on July 19, 2023. On October 9, 2023, the Court sustained the demurrer to the FAXC. On October 25, 2023, Cross-Complainant filed a Second Amended Cross-Complaint (SAXC), the operative complaint here. The motions now before the Court are Cross-Defendant’s Demurrer and Motion to Strike to SAXC.

 

Factual Background

            The initial Complaint alleges that around May 22, 2021, the parties entered into an oral agreement (the “Agreement”) for the sole benefit of Cross-Complainant under which Cross-Defendant agreed to advance certain funds for the cost of an environmental site assessment for the real property at 1767 Standard Avenue, Glendale, California (“the Property”). (Complaint, ¶ 6.) In exchange, Cross-Complainant agreed to timely reimburse Cross-Defendant upon demand for the funds advanced. (Id. at ¶ 7.) Cross-Defendant made three payments totaling $4,425.32 to Fulcrum Resources, Inc. for work done at the Property. (Id. at ¶9.) On July 2, 2021, AdvancedGeo, Inc. proposed an additional environmental site assessment at the Property and on July 8, 2021, Cross-Defendant entered into an agreement with AdvancedGeo, Inc. to pay for its work. (Id. at ¶¶ 10-11.) On July 24, 2021, Cross-Defendant paid AdvancedGeo $3,105.00 for the work. (Id. at ¶ 12.) Despite

numerous demands, Cross-Complainant has not reimbursed Cross-Defendant for the payments.

(Id. at ¶13-16.) Cross-Defendant then filed the initial Complaint.

 

            The operative SAXC alleges two causes of action against Cross-Defendant: (1) fraudulent misrepresentation and (2) breach of contract. The SAXC alleges that the parties entered into a written contract where Cross-Defendant would represent Cross-Complainant in the potential sale of the Property. (SAXC, ¶ 3.) Cross-Complainant then alleges that Cross-Defendant was to ensure that any potential buyer of the Property was made award that if Cross-Complainant was able to successfully refinance the Property, any sale would be cancelled without any resulting obligations or compensation to the potential buyer. (SAXC, ¶ 5.) Cross-Complainant alleges that after a buyer was identified, the refinance of the Property was successful, however, Cross-Defendant failed to inform the buyer, and Cross-Complainant thereby suffered losses amounting to $12,057.98. (SAXC, ¶¶ 6-7, and 12.) Separately, Cross-Complainant alleges that the parties agreed to an oral contract where both parties agreed to pay for half of some expenses claimed by Cross-Defendant with a potential sale of the property. (SAXC, ¶ 13.) Cross-Complainant then alleges that with the filing of the instant lawsuit, Cross-Defendant, breached that oral contract.  

 

Discussion

 

Meet and Confer

Legal Standard and Analysis  for Meet and Confer

            “Before filing a demurrer…the demurring party shall meet and confer in person or by telephone with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer.” (CCP § 430.41(a); see also CCP § 435.5 (imposing similar requirements for a motion to strike).) According to the Declaration of Meagan Thompson-Mann (Thompson-Mann Decl.), Cross-Defendant’s counsel reached out via email on November 17, 2023. (Thompson-Mann Decl., ¶ 4.) The Thompson-Mann Decl. then states that the parties attempted in good faith to settle the entire matter from November 2023 to March 1, 2024. (Thompson-Mann Decl., ¶ 5.) However, there is no indication that the parties conferred in-person or telephonically as required by CCP § 430.41(a). Therefore, the requirements of CCP § 430.41(a) remain unsatisfied. However, per CCP § 430.41(a)(4), “A determination by the court that the meet and confer process was insufficient shall not be grounds to overrule or sustain a demurrer.” Therefore, the Court turns its attention to the Demurrer and Motion to Strike.  

 

Demurrer

Legal Standard for Demurrer

            “[A] demurrer tests the legal sufficiency of the allegations in a complaint.” (Lewis v. Safeway, Inc. (2015) 235 Cal.App.4th 385, 388.) A demurrer can be used only to challenge defects that appear on the face of the pleading under attack or from matters outside the pleading that are judicially noticeable. (See Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994 [in ruling on a demurrer, a court may not consider declarations, matters not subject to judicial notice, or documents not accepted for the truth of their contents].) For purposes of ruling on a demurrer, all facts pleaded in a complaint are assumed to be true, but the reviewing court does not assume the truth of conclusions of law. (Aubry v. Tri-City Hosp. Dist. (1992) 2 Cal.4th 962, 967.)

 

Analysis for Demurrer

            Cross-Defendant demurs to both the first cause of action for fraudulent representation and the second cause of action for breach of contract. Cross-Defendant contends that the first and second causes of action fail to state sufficient facts to constitute a cause of cause of action and adds that as to the first cause of action for fraud, the allegations are subject to the “sham pleading” doctrine and the allegations fail to meet the heightened pleading standard for fraud. For the following reasons, the Court agrees, sustains the Demurrer in its entirety, and denies leave to amend.  

 

a)      Fraudulent Misrepresentation

            “The elements of a cause of action for intentional misrepresentation are (1) a misrepresentation, (2) with knowledge of its falsity, (3) with the intent to induce another’s reliance on the misrepresentation, (4) actual and justifiable reliance, and (5) resulting damage.” (Daniels v. Select Portfolio Servicing, Inc. (2016) 246 Cal.App.4th 1150, 1166.) The facts constituting the alleged fraud must be alleged factually and specifically as to every element of fraud, as the policy of “liberal construction” of the pleadings will not ordinarily be invoked. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.)

 

                                                        i.            Sham Pleading Doctrine

            Generally, after an amended pleading has been filed, courts will disregard the original pleading. However, an exception to this rule is found…where an amended complaint attempts to avoid defects set forth in a prior complaint by ignoring them. The court may examine the prior complaint to ascertain whether the amended complaint is merely a sham.” (Vallejo Development Co. v. Beck Development Co. (1994) 24 Cal.App.4th 929, 946.)

           

            Here, Cross-Defendant argues that the alleged Representation Agreement in which Cross-Defendant would represent Cross-Complainant in the potential sale of the Property, is subject to the sham pleading doctrine because in the original Cross-Complaint alleged that the agreement was oral. (Cross-Complaint, ¶ 8.) However, after the demurrer to the initial Cross-Complaint was sustained on statute of frauds grounds, Cross-Complainant then alleged the contract was written in both the FAXC, and here in the operative SACX. Cross-Defendant points to Deveny v. Entropin, Inc. (2006) 139 Cal.App.4th 408, which holds that “Under the ‘sham pleading doctrine,’ plaintiffs are precluded from amending complaints to omit harmful allegations, without explanation, from previous complaints to avoid attacks raised in demurrers or motions for summary judgment.” (Id. at 426.) Within the SACX, there is no explanation for why the allegation that the Representation Agreement, which was initially oral, is now written. This is the precise category of allegations the sham pleading doctrine is meant to target. The opposition papers are silent as to this point. Accordingly, the Court sustains the Demurrer to the first cause of action.      

 

                                                      ii.            Heightened Pleading Requirement

            In addition to falling to the sham pleading doctrine, the allegations as written do not meet the specificity requirement for fraud. As aforementioned, the policy of liberal construction is not applied to fraud claims which must meet a heightened pleading standard. “Generally, fraud actions are subject to strict requirements of particularity in pleading.” (Furia v. Helm (2003) 111 Cal.App.4th 945, 956.) The SAXC states that Cross-Defendant informed Cross-Complainant that he would make any potential buyer aware that if the refinance was successful, then the Property’s sale would be cancelled. (SAXC, ¶ 5.) However, the SAXC fails to make clear what exactly was said, and when it was said. Additionally, there is no detail as to the communications between Cross-Defendant and the potential buyer, Kim DeJesus. Moreover, the second and third element of the cause of action are unclear from the SAXC. The opposition papers point the Court back to the SAXC, which alleges that Cross-Defendant knew the alleged misrepresentation was false, but the SAXC fails to explain how. Likewise, the element of intent to deceive is baldly alleged, but with no specific details. Accordingly, the cause of action falls for failure to meet the heightened pleading requirement.

 

 

b)      Breach of Contract

            To state a cause of action for breach of contract, Plaintiff must be able to establish “(1) the existence of the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to the plaintiff.” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.) If a breach of contract claim “is based on alleged breach of a written contract, the terms must be set out verbatim in the body of the complaint or a copy of the written agreement must be attached and incorporated by reference.” (Harris v. Rudin, Richman & Appel (1999) 74 Cal.App.4th 299, 307.) In some circumstances, a plaintiff may also “plead the legal effect of the contract rather than its precise language.” (Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 198-199.)

 

            This breach of contract claim stems from a separate oral contract where allegedly, the parties agreed to paid for half of “some expenses”. (SAXC, ¶¶ 13-14.) The first step is for Cross-Complainant to establish the existence of a contract. As this was alleged to have been an oral contract, Cross-Complainant may plead the legal effect of the contract, however, the SAXC fails to do so. It is wholly unclear to the Court what the terms of the alleged contract were, and what action would have constituted a breach. The only detail regarding the effect of the purported contract is that when Cross-Defendant filed the initial Complaint in this matter this constituted a breach of the oral contract. But with no detail as to how nor why this was a breach of the terms of the contract, Cross-Defendant is left with no manner in which to assess the claim alleged against him. Although such matters may be alleged on information and belief, the SAXC must give notice of the issues in a manner sufficient to enable preparation of a defense. (See Doe v. City of Los Angeles (2007) 42 Cal.4th 531, 549-550.) Here, in the second cause of action they do not.   

 

Leave to Amend

Legal Standard and Analysis for Leave to Amend

            Leave to amend must be allowed where there is a reasonable possibility of successful amendment. (See Goodman v. Kennedy (1976) 18 Cal.3d 335, 349 [court shall not “sustain a demurrer without leave to amend if there is any reasonable possibility that the defect can be cured by amendment”]. This is Cross-Complainant’s third attempt at successful amendment. Seeing as the previous attempts were insufficient, the Court denies leave to amend.

 

Conclusion

            Accordingly, Plaintiff/Cross-Defendant Peter Steigleder’s Demurrer to the Second Amended Cross-Complaint is SUSTAINED in its entirety without leave to amend. As such, the Motion to Strike is denied as moot.

 

 

 

Moving party to give notice.