Judge: Mark H. Epstein, Case: 23SMCV05226, Date: 2024-03-06 Tentative Ruling

Case Number: 23SMCV05226    Hearing Date: March 6, 2024    Dept: I

The demurrer is OVERRULED.  The motion to strike is DENIED.

Plaintiff alleges fraud.  According to the operative pleading (the first amended complaint), plaintiff placed an order to purchase custom alloy tubes from defendant and paid a deposit of almost $160,000.  The tubes were not shipped, though.  Plaintiff states that defendant claimed that there were various and unspecified production delays that caused the failure to ship.  But when plaintiff’s representatives went to defendant’s facilities to test the products, plaintiff learned that there were no manufacturing plants at either location.  One location was a commercial building and the other was a condominium complex.  Also, neither had signage for defendant.  The day after the inspection, defendant cancelled the orders purportedly because the tubes did not pass quality control.  Although defendant offered to return the deposits, defendant conditioned the return on a general release, which plaintiff refused to sign.

Defendant demurs to the complaint and seeks to strike punitive damages.  (These should have been filed separately, but the court will overlook that problem this one time.)

Plaintiff contends that this was theft by false pretenses.  The theory is that defendant took the $160,000 as a supposed deposit to manufacture the custom tubes when in fact defendant had no intention of making the tubes at all (and lacked the ability to do so).  That, plaintiff contends, violates Penal Code section 496, which expressly provides for a civil remedy.  Defendant claims that the cause of action fails because the money was paid pursuant to a contract, and contractual payments cannot form the basis for a section 496 cause of action.  Defendant is right on the law but wrong on the application.  A general breach of contract will not suffice, but that is not the allegation here.  So, for example, if defendant had made the tubes, but did so poorly, the $160,000 payment would not be theft even if defendant refused to return the money.  It would be a breach of contract; nothing more.  But where, as here, the allegation is that defendant had no intention of making the tubes but falsely contracted to do so, that sounds in fraud, not a breach of contract.  It is like selling the Brooklyn Bridge: the fact that money is turned over pursuant to a contract to sell the bridge does not mean that taking the money was not theft.  As our Supreme Court noted in Siry Investment, L.P. v. Farkhondehpour (2022) 13 Cal.5th 333 (citing Bell v. Feibush (2013) 212 Cal.App.4th 1041), the statute, though penal in nature, was intended to be construed broadly and applies to any fraudulent representation or promise designed to defraud a person of money.  False pretense will qualify for the statutory violation.

Of course, the fact that plaintiff alleges fraud does not make it so.  But it is enough for pleading purposes.  As such, the demurrer is OVERRULED.  And because fraud is alleged, there is enough here to support a claim for punitive damages, so the motion to strike is DENIED. 

Defendant has 5 court days to answer.

A brief word on the late-filed opposition.  Counsel recently filed a declaration stating that the late opposition was due to a calendaring error.  That happens; perfection is aspirational, not the standard.  The court has considered the opposition and the reply because the court sees no prejudice.  The court notes that its ruling would have been the same had the opposition been stricken and the reply not considered.