Judge: Martha K. Gooding, Case: 23-01300926, Date: 2023-08-07 Tentative Ruling

1) Demurrer to Complaint – SUSTAINED WITH LEAVE TO AMEND

2) Case Management Conference – CONTINUED TO 11/6/2023 AT 9:00 A.M. IN DEPARTMENT C31

Before the Court is a Demurrer by Defendants Arbor Real Estate Professionals, Inc. and Jill Renee Billington (collectively, “Defendants”) to the second cause of action, for breach of fiduciary duty, alleged in the Complaint filed by Plaintiffs Christopher Heintz and Ashley Heintz (collectively, “Plaintiffs”).  The Demurrer is SUSTAINED with 20 days leave to amend.

The Case Management Conference is continued to 11/6/2023 at 9:00 a.m. in Department C31.

“The elements of a cause of action for breach of fiduciary duty are the existence of a fiduciary relationship, breach of fiduciary duty, and damages. [Citation.]” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 820-821.) 

“Breach of a real estate agent's fiduciary duty to his or her client may constitute negligence or fraud, depending on the circumstances of the case. [Citation.] Additionally, a real estate agent, as a fiduciary, is also ‘ “... liable to his principal for constructive fraud even though his conduct is not actually fraudulent. Constructive fraud is a unique species of fraud applicable only to a fiduciary or confidential relationship. [Citation.] [¶] [A]s a general principle constructive fraud comprises any act, omission or concealment involving a breach of legal or equitable duty, trust or confidence which results in damage to another even though the conduct is not otherwise fraudulent. Most acts by an agent in breach of his fiduciary duties constitute constructive fraud. The failure of the fiduciary to disclose a material fact to his principal which might affect the fiduciary's motives or the principal's decision, which is known (or should be known) to the fiduciary, may constitute constructive fraud. Also, a careless misstatement may constitute constructive fraud even though there is no fraudulent intent.” [Citation.]’ [Citation.]”  (Assilzadeh v. California Federal Bank (2000) 82 Cal.App.4th 399, 415.)

“‘Constructive fraud “arises on a breach of duty by one in a confidential or fiduciary relationship to another which induces justifiable reliance by the latter to his prejudice.” [Citation.] Actual reliance and causation of injury must be shown. [Citation.]’ [Citations.]” (Prakashpalan v. Engstrom, Lipscomb & Lack (2014) 223 Cal.App.4th 1105, 1131; see, e.g., Salahutdin v. Valley of California, Inc. (1994) 24 Cal.App.4th 555, 562-563 [real estate broker’s breach of fiduciary duty by making affirmative statements as to the size, boundaries, and subdividability of the property, knowing those facts to be material to the plaintiff and failing to disclose that he had not confirmed their accuracy constituted constructive fraud].))

As with other fraud causes of action, constructive fraud must be pled with specificity, “meaning ‘(1) general pleading of the legal conclusion of fraud is insufficient; and (2) every element of the cause of action for fraud must be alleged in full, factually and specifically, and the policy of liberal construction of pleading will not usually be invoked to sustain a pleading that is defective in any material respect.’ [Citation.]”  (Schauer v. Mandarin Gems of Cal., Inc. (2005) 125 Cal.App.4th 949, 961.)

Here, Plaintiffs’ second cause of action is lacking in specificity.  It does not allege (a) when Defendant Billington made the alleged representation(s) that the work performed on the Property was done “to code” and that no permits were needed; (b) to whom the representation(s) was/were made (i.e., to which specific Plaintiff – or to both); and (c) how the  representation(s) was/were made (i.e., orally or in writing).  Accordingly, the demurrer to the second cause of action for breach of fiduciary duty is sustained with leave to amend.

As for Defendants’ argument that the second cause of action fails to plead damages proximately caused by Defendant Billington’s failure to conduct a visual inspection:  Even if true, it does not warrant sustaining the demurrer, because Defendants do not argue that Plaintiffs failed to sufficiently allege damages caused by Billington’s constructive fraud.

Defendants are ordered to give notice.