Judge: Mark H. Epstein, Case: 22SMCV01719, Date: 2023-02-14 Tentative Ruling

Case Number: 22SMCV01719    Hearing Date: February 14, 2023    Dept: R

The demurrer is SUSTAINED WITH LEAVE TO AMEND in part and OVERRULED in part.  The motion to strike is MOOT IN PART AND GRANTED IN PART.

Plaintiffs Amber and Ryan Scholer (collectively “plaintiffs”) filed this construction breach of contract case against defendants Matthew Cook Construction, ADI Electrical Services, and From the Ground Up JRF Construction, Inc.  According to the operative complaint, plaintiffs own property located in Pacific Palisades.  (Compl., ¶12.)  On December 6, 2020, plaintiffs entered into a written contract with defendant MCC on a home renovation project that, per the initial bid, would include demolition and exterior and interior renovations at a cost of approximately $1,061,000.  (Id. at ¶13.)  MCC subcontracted with ADI for electrical work and JRF for demolition and waterproofing.  (Id. at ¶14.)

Plaintiffs state that they discovered significant delays in ordering materials and construction in early 2022.  (Compl., ¶15.)   They claim that the delays and costs were caused by MCC’s failure to order materials and complete earlier necessary work.  (Id. at ¶16.) Plaintiffs allege that one such example was MCC and/or JRF’s failure to order siding for the property in a timely manner and instead telling plaintiffs that it was not in stock, therefore forcing plaintiffs to agree to different siding.  (Id. at ¶17.)  There was allegedly a similar issue with a door.  (Id. at ¶18.)  On February 28, 2022, MCC provided an updated project budget of $2,133.692.30, which was $1,072,692.30 more than the initial bid.  (Id. at ¶¶19-20.)  Plaintiffs state that they disputed the necessity of additional costs and charges included in the updated project budget on the basis the work was already covered by the initial bid and/or that MCC’s delays/negligence caused the additional work.  (Id. at ¶21.)

Plaintiffs contend they have had to repay for work to be completed at the property due to MCC’s negligence, they paid in full for work that was never completed, and that MCC double billed, among other things.  (Compl., ¶¶23-25.)  MCC’s owner purportedly walked off the job after landscapers hit an electrical conduit placed by ADI.  (Id. at ¶28.)

Plaintiffs allege the following causes of action: (1) breach of contract against MCC; (2) negligence against all defendants; (3) fraud against MCC; and (4) accounting against all defendants.  Currently before the court is defendant MCC’s demurrer and motion to strike the complaint.  Plaintiffs oppose.

MCC demurs to the third cause of action for fraud on the grounds of failure to state sufficient facts and uncertainty. As a preliminary matter, “demurrers for uncertainty are disfavored, and are granted only if the pleading is so incomprehensible that a defendant cannot reasonably respond.”  (Lickiss v. Fin. Industry Regulatory Authority (2012) 208 Cal.App.4th 1125, 1135.)  A demurrer for uncertainty does not address whether the pleading fails to “incorporate sufficient facts in the pleading but is directed at the uncertainty existing in the allegations actually made.”  (Butler v. Sequeira (1950) 100 Cal.App.2d 143, 145-146.)  The only arguments asserted by MCC pertain to the ground of failure to state sufficient facts.  Thus, the demurrer for uncertainty is unsubstantiated and OVERRULED.

MCC argues that plaintiffs fail to plead fraud with the requisite specificity.  The court agrees.  The court is not sure what acts constitute the fraud in question.  The complaint indicates that this is a claim for promissory fraud: “Plaintiffs allege that in connection with the Contract, MCC made the following representations to Plaintiffs: (a) that it would perform the work or cause all the work to be performed on the Project in a diligent, workmanlike manner in strict conformity with the plans, laws and trade practices; (b) that it would use qualified workers to complete the work; and (c) that it would complete the work on the Project in a timely manner.”  (Compl., ¶50.)  “An action for promissory fraud may lie where a defendant fraudulently induces the plaintiff to enter into a contract.  (Chelini v. Nieri (1948) 32 Cal.2d 480, 487.)”  (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638, parallel citations omitted.)  “Thus, in a promissory fraud action, to sufficiently alleges defendant made a misrepresentation, the complaint must allege (1) the defendant made a representation of intent to perform some future action, i.e., the defendant made a promise, and (2) the defendant did not really have that intent at the time that the promise was made, i.e., the promise was false.  (Id. at 639.)”  (Beckwith v. Dahl (2012) 205 Cal.App.4th 1039, 1060.)

The representations are not specifically enough alleged.  “In California, fraud must be pled specifically; general and conclusory allegations do not suffice.  (Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 74; Nagy v. Nagy (1989) 210 Cal.App.3d 1262, 1268; 5 Witkin, Cal.Procedure (3d ed. 1985) Pleading, § 662, pp. 111–112.)  ‘Thus “ ‘the policy of liberal construction of the pleadings . . . will not ordinarily be invoked to sustain a pleading defective in any material respect.”’  [Citation.]  [¶] This particularity requirement necessitates pleading facts which show how, when, where, to whom, and by what means the representations were tendered.’  (Stansfield, supra, 220 Cal.App.3d at p. 73, italics in original.)”  (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645, parallel citations omitted, emphasis by Stansfield Court.)  “The requirement of specificity in a fraud action against a corporation requires the plaintiff to allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written.”  (Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) Cal.App.4th 153, 157.)

In opposition, plaintiffs refer to their allegations regarding double billing, lies regarding availability of materials, and similar things.  Those allegations, however, post-date the creation of the contract, which is exactly the problem.  If anything, they satisfy the element of fraudulent intent (maybe), but do not satisfy the standard that the representations themselves be pled with specificity.  In other words, there seems to be a disconnect between the fraud upon which plaintiff relies (like double-billing) and the fraud that forms the complaint’s basis (like using qualified workers to do the work, when, apparently, those on the project lacked the requisite qualificatins).  The demurrer is therefore SUSTAINED.  Plaintiffs need to specify the specific statements that form the basis of the cause of action.  It is not defendants’ job to try and figure out which is which.

MCC also moves to strike plaintiffs’ request for punitive damages, disgorgement, and attorneys’ fees.  The request for punitive damages is contained within the fraud cause of action.  Because the demurrer was sustained to that cause of action, the motion is MOOT as to that claim.  (That said, were the court to have overruled the demurrer, the motion to strike would fail.  At the pleading stage, if a complaint is sufficient to allege fraud, it will generally, though not always, be sufficient to allege punitive damages.  Defendant ought to consider that in deciding whether to renew the motion to strike if an amended complaint is filed.)  In their opposition, plaintiffs have agreed to omit the requests for attorneys’ fees and disgorgement.  The motion is therefore GRANTED to those portions of the motion.

Plaintiffs have 30 days’ leave to amend.