Judge: Maurice A. Leiter, Case: 22STCV03435, Date: 2023-09-01 Tentative Ruling

Case Number: 22STCV03435    Hearing Date: September 1, 2023    Dept: 54

Hearing Date: September 1, 2023

Department 54, Judge Maurice A. Leiter

Demurrer to First Amended Complaint and Motion to Strike

Moving Party: Defendants American Pacific Mortgage Corp., Barry Willner and Maureen Ramsay

Responding Party: Plaintiff Kathy Greco

T/R:     DEFENDANTS’ DEMURRER IS OVERRULED.

DEFENDANTS’ MOTION TO STRIKE IS DENIED.

DEFENDANTS TO FILE AND SERVE ANSWERS TO THE FIRST AMENDED COMPLAINT WITHIN 30 DAYS OF NOTICE OF RULING.

DEFENDANTS TO NOTICE. 

If the parties wish to submit on the tentative, please email the courtroom at SMCdept54@lacourt.org with notice to opposing counsel (or self-represented party) before 8:00 am on the day of the hearing. 

The Court considers the moving papers, opposition, and reply.

BACKGROUND

On December 2, 2022, Plaintiff Kathy Greco filed the operative first amended complaint against Defendants American Pacific Mortgage Corp., Barry Willner and Maureen Ramsay, asserting causes of action (1) breach of contract; (2) promissory estoppel; (3) breach of fiduciary duty; (4) fraud; (5) fraud by omission; (6) negligent nondisclosure; (7) negligent supervision; and (8) unfair competition.

Plaintiff alleges Defendants were her mortgage brokers for the purchase of a condo. Plaintiff alleges Defendants represented that she would be approved for a “bank statement” loan, but at the last minute stated she was not approved. Plaintiff alleges Defendants then offered Plaintiff a private loan at a higher interest rate with direct benefits to Defendants in a “bait and switch” scheme.

ANALYSIS

A demurrer to a complaint may be taken to the whole complaint or to any of the causes of action in it.  (CCP § 430.50(a).)  A demurrer challenges only the legal sufficiency of the complaint, not the truth of its factual allegations or the plaintiff's ability to prove those allegations.  (Picton v. Anderson Union High Sch. Dist. (1996) 50 Cal. App. 4th 726, 732.)  The court must treat as true the complaint's material factual allegations, but not contentions, deductions or conclusions of fact or law.  (Id. at 732-33.)  The complaint is to be construed liberally to determine whether a cause of action has been stated.  (Id. at 733.)

A. Breach of Fiduciary Duty, Negligent Nondisclosure and Negligent Supervision

Defendants demur to the causes of action for breach of fiduciary duty and negligence on the grounds that Defendants do not owe Plaintiff any fiduciary or tort duties in obtaining a mortgage loan. Defendants assert that they were merely acting as a lender rather than a broker. In opposition, Plaintiff contend that the FAC alleges Defendants acted as brokers, who owe statutory fiduciary duties to borrowers. (Civ. Code § 2923.1(a).) Plaintiff alleges Defendants breached this duty by the bait and switch scheme in which they attempted to persuade Plaintiff to take a private loan with financial benefit to Defendants. This is sufficient to state causes of action for breach of fiduciary duty and negligence.

Defendants also argue that Plaintiff has failed to allege facts showing negligent supervision. Plaintiff alleges Defendant APM knew or should have known of their employees’ wrongdoing; Defendant Willner represented that he often provided the private loans. This is sufficient to establish a cause of action for negligent supervision.

Defendants’ demurrer to the causes of action for breach of fiduciary duty, negligent nondisclosure and negligent supervision is OVERRULED.

B. Breach of Contract

“The standard elements of a claim for breach of contract are: ‘(1) the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) damage to plaintiff therefrom.’” (Wall Street Network, Ltd. v. New York Times Co. (2008) 164 Cal.App.4th 1171, 1178.)

Defendants demur to the cause of action for breach of contract on the grounds that Plaintiff has failed to allege a contract. Plaintiff alleges Defendants orally agreed to obtain a bank statement loan for Plaintiff, Plaintiff performed her obligations, and Defendants breached the agreement by failing to provide the bank statement loan. This is sufficient to state a cause of action for breach of contract.

Defendants’ demurrer to the cause of action for breach of contract is OVERRULED.

C. Promissory Estoppel

“The elements of promissory estoppel are (1) a promise, (2) the promisor should reasonably expect the promise to induce action or forbearance on the part of the promisee or a third person, (3) the promise induces action or forbearance by the promisee or a third person (which we refer to as detrimental reliance), and (4) injustice can be avoided only by enforcement of the promise.” (West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 803, reh’g denied (Apr. 11, 2013), review denied (July 10, 2013).)

As stated, Plaintiff alleges Defendants represented that they would and did obtain a bank statement loan for Plaintiff. Plaintiff relied on this promise by removing the loan contingency from escrow and vacating her rental home. This is sufficient to state a cause of action for promissory estoppel.

Defendants’ demurrer to the cause of action for promissory estoppel is OVERRULED.

D. Fraud

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.) 

Defendants assert Plaintiff has failed to allege fraud with the requisite specificity. Plaintiff alleges Defendants made various misrepresentations about her approval for a bank statement loan in emails and orally, Plaintiff relied on those misrepresentations, Defendants knew their representations were false and were made to induce Plaintiff into agreeing to a private loan with a higher interest rate and balloon payment, and Plaintiff was damaged as a result. This is sufficient to state causes of action for fraud.

Defendants’ demurrer to the causes of action for fraud is OVERRULED.

E. Motion to Strike

“Any party, within the time allowed to response to a pleading, may serve and file a notice of motion to strike the whole or any part" of that pleading. (CCP § 435(b)(1).) “The Court may, upon a motion made pursuant to Section 435, or at any time in its discretion, and upon terms it deems proper: (a) Strike out any irrelevant, false or improper matter asserted in any pleading; (b) Strike out all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the Court." (CCP § 436.) The Court's authority to strike improper pleadings includes the power to strike those pleadings that are "not filed in conformity with its prior ruling." (Janis v. California State Lottery Com (1998) 68 Cal.App.4th 824, 829.)

Defendants move to strike Plaintiff’s claim for punitive damages. As Plaintiff has stated causes of action for fraud, Plaintiff has alleged entitlement to punitive damages.

The motion to strike is DENIED.