Judge: Maurice A. Leiter, Case: 22STCV21233, Date: 2022-12-06 Tentative Ruling

Case Number: 22STCV21233    Hearing Date: December 6, 2022    Dept: 54

Hearing Date: December 6, 2022

Department 54, Judge Maurice A. Leiter

Demurrer to Complaint

Moving Party: Defendants Alan C. Fox and ACF Property Management

Responding Party: Plaintiffs Olivewood Plaza, Stanley Kandel, and Charlotte Kandel

T/R:     DEFENDANTS’ DEMURRER TO THE FIRST, FIFTH, SIXTH, AND SEVENTH CAUSES OF ACTION IS OVERRULED.

DEFENDANTS’ DEMURRER TO THE SECOND AND THIRD CAUSES OF ACTION IS SUSTAINED WITH LEAVE TO AMEND.

PLAINTIFFS TO FILE AND SERVE A 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 8:30 am on the day of the hearing. 

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

BACKGROUND

            On June 29, 2022, Plaintiffs Olivewood Plaza, Stanley Kandel, and Charlotte Kandel sued Defendants Alan C. Fox and ACF Property Management for inducing them to invest in various real estate ventures by misrepresenting relevant facts. Plaintiffs’ complaint alleges seven causes of action: (1) breach of fiduciary duty; (2) intentional misrepresentation/suppression; (3) negligent misrepresentation; (4) securities fraud; (5) elder abuse; (6) recission; and (7) accounting. Plaintiffs have dismissed the fourth cause of action for securities fraud.

On September 26, 2022, Defendants demurred to each cause of action.

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.   Second Cause of Action: Intentional Misrepresentation

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 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 contend Plaintiff has failed to allege intentional misrepresentation or concealment with the requisite specificity. The Court agrees. Plaintiff alleges that Defendants “[m]isrepresented in the Offering Materials the price and the cash required for the Properties by overstating among other things, the purchase price, closing costs and projected expenses by many hundreds of thousands of dollars.” (Compl. ¶ 12.) They also allege Defendants “fail[ed] to disclose the conflict of interest that arose from making business decisions for the benefit of Defendants at the expense of Plaintiffs.” (Compl. ¶ 12.) These allegations do not provide sufficient details concerning the statements alleged to be false.

The cases cited by Plaintiffs do not support their argument. Boschma v. Home Loan Center, Inc. (2011) 198 Cal.App.4th 230 specifically finds that “the enhanced pleading burden of a fraud claim is met by the attachment of the relevant Option ARM documents…which provides the specific content of the allegedly false representations…as well as the date and place of the alleged fraud.” (Id., 198 Cal.App.4th at 248.) Plaintiffs provide no analogous document that provides the specific content of the alleged false representations. Defendants’ demurrer as to the second cause of action is SUSTAINED.

B.   First, Third, Fifth, Sixth, and Seventh Causes of Action

Defendants argue that the first, third, fifth, sixth, and seventh causes of action must be plead with particularity because these causes of action are predicated on Defendants’ allegedly fraudulent conduct. Defendants are correct a to the third cause of action only.

The cases that Defendants cite to do not support this proposition. Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167 holds only that “a complaint for negligent misrepresentation in a holder's action should be pled with the same specificity required in a holder's action for fraud.” (Id., 30 Cal.4th at 184 (emphasis added).) It says nothing about causes of action for breach of fiduciary duty, elder abuse, recission, and accounting. Goldrich v. Nat. Y Surgical Specialties, Inc. (1994) 25 Cal.App.4th 772 discusses the plaintiff’s fraud claim; it does not discuss the relevant causes of action. (Id., 25 Cal.App.4th at 783.)

Defendants’ demurrer to the third cause of action for negligent misrepresentation is SUSTAINED for lack of specificity. Defendants’ demurrer to the first, fifth, sixth, and seventh causes of action are OVERRULED.

C.   Statute of Limitations

Defendants demur to all causes of action on the grounds that they are barred by the statute of limitations. Defendants argue that all causes of action accrued between six and eighteen years ago, and all causes of action have a two-to-four-year statute of limitations. (See CCP §§ 343, 338(d), 331.)

Plaintiff argues that the delayed discovery rule tolls the statute of limitations in their case. To invoke delayed discovery, Plaintiff must allege “(1) the time and manner of discovery and (2) the inability to have made earlier discovery despite reasonable diligence.” (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 808; see Baker v. Beech Aircraft Corp. (1974) 39 Cal.App.3d 315, 321.) The burden is on the plaintiff to show diligence, and conclusory allegations will not withstand demurrer.” (E-Fab, Inc. v. Accountants, Inc. Services (2007) 153 Cal. App. 4th 1308, 1319.) 

            Plaintiffs allege they “did not discover nor suspect Defendants’ wrongdoing alleged herein until April 2021, when Plaintiffs were notified of a complaint against Defendants alleging substantially all of the above referenced allegations in paragraph 12 with respect to Fenton and TJM. Plaintiffs was not aware of any fact that gave any of them reason to suspect Defendants’ wrongdoing before that time.” (Compl. ¶ 14.) These allegations are sufficient to allege delayed discovery; they show the time and manner or discovery. Defendants’ demurrer as to each cause of action based on the statute of limitations is OVERRULED.