Judge: Melvin D. Sandvig, Case: 23CHCV03185, Date: 2024-05-01 Tentative Ruling

Case Number: 23CHCV03185    Hearing Date: May 1, 2024    Dept: F47

Dept. F47

Date: 5/1/24

Case #23CHCV03185

 

DEMURRER TO THE ORIGINAL CROSS-COMPLAINT

 

Demurrer filed on 2/29/24.

 

MOVING PARTY: Cross-Defendants Gevork Voskanian; Mary Keryan and KSJV3, Inc.

RESPONDING PARTY: Cross-Complainants Yusheng Shew and Jill J. Van

NOTICE: ok

 

Demurrer is to the 1st, 5th, 7th and 9th causes of action:

            1.  Fraud – Promise Without Intent to Perform

            2.  Breach of Stock Purchase Agreement

            3.  Breach of Secured Promissory Note

            4.  Breach of Guaranty

            5.  Breach of Implied Covenant of Good Faith and Fair Dealing

            6.  Judicial Foreclosure of UCC-1 Lien

            7.  Interference With Contract

            8.  Accounting

            9.  Declaratory Relief

 

RULING: The demurrer is overruled as to the 1st, 7th and 9th causes of action and sustained without leave to amend as to the 5th cause of action.  Answer is due within 30 days. 

 

SUMMARY OF FACTS & PROCEDURAL HISTORY

 

This action arises out of the sale of a fencing company, Plaintiff/Cross-Defendant KSJV3, Inc. dba Five Star Fence (Five Star), from Defendants/Cross-Complainants Yusheng Shew (Shew) and Jill Van (Van) to Plaintiffs/Cross-Defendants Gevork Voskanian (Voskanian) and Mary Keryan (Keryan). 

 

On 10/20/23, Voskanian, Keryan and Five Star filed this action against Shew and Van for: (1) Breach of Contract, (2) Breach of Implied Covenant of Good Faith and Fair Dealing, (3) Fraud and Deceit, (4) Negligent Misrepresentation, (5) Accounting, (6) Declaratory Relief,

(7) Unjust Enrichment, (8) Conspiracy, (9) Intentional Interference and (10) Negligent Interference. 

 

On 12/18/23, Shew and Van filed and served the subject cross-complaint against Voskanian, Keryan and Five Star for: (1) Fraud – Promise Without Intent to Perform, (2) Breach of Stock Purchase Agreement, (3) Breach of Secured Promissory Note, (4) Breach of Guaranty, (5) Breach of Implied Covenant of Good Faith and Fair Dealing, (6) Judicial Foreclosure of UCC-1 Lien, (7) Interference With Contract, (8) Accounting and (9) Declaratory Relief.   

 

On 12/26/23, Shew and Van filed and served a demurrer, with a 3/8/24 hearing date, to the 1st – 5th and 7th and 8th causes of action in the complaint.  On 2/22/24, Voskanian, Keryan and Five Star filed their First Amended Complaint for: (1) Breach of Contract, (2) Breach of Implied Covenant of Good Faith and Fair Dealing, (3) Fraud and Deceit, (4) Negligent Misrepresentation, (5) Accounting, (6) Declaratory Relief, (7) Intentional Interference, (8) Negligent Interference, (9) Assault and (10) Intentional Infliction of Emotional Distress.

 

On 2/29/24, Voskanian, Keryan and Five Star filed and served the instant demurrer to the 1st cause of action for Fraud – Promise Without Intent to Perform, 5th cause of action for Breach of Implied Covenant of Good Faith and Fair Dealing, 7th cause of action for Interference With Contract and 9th cause of action for Declaratory Relief in Shew and Van’s cross-complaint.  Shew and Van have opposed the demurrer.     

 

The Court notes that Shew and Van have not filed a response to the First Amended Complaint (i.e., neither an answer nor demurrer to the First Amended Complaint).

 

ANALYSIS

 

The notice of demurrer indicates that it is based on CCP 430.10(e), (f) and (g).  (See Notice of Demurrer, p.2:2-9).  The demurrer document indicates that Shew and Van demurrer to the 1st, 5th, 7th and 9th causes of action solely on the ground that the 1st, 5th, 7th and 9th causes of action fail to allege sufficient facts to state a cause of action, CCP 430.10(e).  (Demurrer, p.3:5-23).  However, the demurrer document incorrectly identifies the 1st cause of action as Negligence (Legal Malpractice), the 5th cause of action as Negligence (Legal Malpractice) and incorrectly refers to it as the 2nd cause of action, the 7th cause of action as Breach of Contract and incorrectly refers to it as the 3rd cause of action, and the 9th cause of action as Breach of Contract and incorrectly refers to it as the 3rd cause of action.  Id.

 

1st cause of action – Fraud – Promise Without Intent to Perform

 

The elements of a fraud cause of action are: (1) false representation by defendant, (2) intent to deceive or induce reliance, (3) justifiable reliance by plaintiff, (4) resulting damages.  Service by Medallion, Inc. (1996) 44 CA4th 1807, 1816.  Fraud claims must be pled with specific facts showing how, when, where, to whom and by what means the misrepresentations were made.  Lazar (1996) 12 C4th 631, 645. 

 

A promise made without intending to perform it, or promissory fraud, is actionable as fraud.  Engalla (1997) 15 C4th 951, 973.  The elements of a claim for promissory fraud are: (1) a promise made regarding a material fact without any intention of performing it; (2) the existence of the intent not to perform at the time the promise was made; (3) intent to deceive or induce the promisee to enter into a transaction; (4) reasonable reliance by the promisee; (5) nonperformance by the party making the promise; and (6) resulting damage to the promisee.  Gruber (2020) 48 CA5th 529, 540 citing Behnke (2011) 196 CA4th 1443, 1453.

 

Contrary to the assertions in the demurrer, Shew and Van have pled each of the necessary elements with the required factual specificity.  (See Cross-Complaint ¶¶28-32).

 

 

 

5th cause of action – Breach of the Implied Covenant of Good Faith and Fair Dealing

 

Every contract includes an implied covenant of good faith and fair dealing that neither party will do anything to interfere with the other party’s right to receive the benefits of the agreement.  Howard (2010) 187 CA4th 498, 528 citing Restatement 2d Contracts, §205.  The exact nature and extent of the duty depends on the nature and purpose of the underlying contract and the parties’ legitimate expectations arising from the contract.  Howard, supra.  Generally, breach of the implied covenant gives rise only to contract damages; however, in the insurance context, breach of the implied covenant is also actionable in tort allowing for the recovery of extracontractual damages.  See Foley (1988) 47 C3d 654, 683-684; State Farm Mutual Automobile Insurance Co. (1970) 9 CA3d 508, 528; California Capital Insurance Co. (C.D. California 2020) 472 F.Supp.3d 754, 758-761; Chu (2021) 60 CA5th 346, 356-357.

 

Here, the breach of implied covenant claim seeks the same damages and the breach of contract claim.  As such, it is duplicative and unnecessary.  Since this case does not involve an insurance contract between the parties, the defect in the breach of the implied covenant of good faith and fair dealing cause of action cannot be cured by amendment.    

 

7th cause of action – Intentional Interference

 

The elements of an intentional interference with contract cause of action are: (1) a valid contract between plaintiff and a third party; (2) defendant’s knowledge of this contract; (3) defendant’s intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage.  Pacific Gas & Electric Co. (1990) 50 C3d 1118, 1126.

 

Contrary to Voskanian and Keryan’s contention, the cross-complaint sufficiently alleges their interference with contractual relationships between Shew and Van and third parties.  (Cross-Complaint ¶¶14(a)-(b), 60-61).  The cross-complaint also sufficiently alleges the remaining elements of the claim.  (Cross-Complaint ¶¶62-67).

 

9th cause of action – Declaratory Relief

 

When an actual controversy relating to the legal rights and duties of the parties to a contract arises, a person interested under the contract may seek a declaration from the court of his or her rights or duties under the contract.  See CCP 1060.  Such remedies are cumulative and do not preclude additional relief based on the same facts.  CCP 1062.

 

Here, the cross-complaint sufficiently sets forth the basis for a declaratory relief cause of action.  Since Voskanian and Keryan also make a claim for declaratory relief in their First Amended Complaint, they cannot now deny the existence of an actual controversy.  See Ludgate Insurance Co. (2000) 82 CA4th 592, 604. 

 

CONCLUSION

 

The demurrer is overruled as to the 1st, 7th and 9th causes of action and sustained without leave to amend as to the 5th cause of action.  Answer is due within 30 days.