Judge: Michael E. Whitaker, Case: 23SMCV04856, Date: 2024-03-07 Tentative Ruling

Case Number: 23SMCV04856    Hearing Date: March 7, 2024    Dept: 207

TENTATIVE RULING

MOTIONS

Plaintiffs Daniel Eisenberg and Martha Bailey (“Plaintiffs”) filed a First Amended Complaint (“FAC”) against Defendants LA Solar Group, Inc., dba AP Electrical System (“LA Solar”); Ara Petrosyan (“Petrosyan”); and Merchants Bonding Company (Mutual) (“Merchants”); alleging five causes of action for (1) breach of express warranty; (2) negligence; (3) breach of contract; (4) fraud; and (5) breach of contract against surety.  The first four causes of action are brought against all Defendants except Merchants, and the fifth cause of action is brought only against Merchants.

Defendants LA Solar Group, Inc. and Ara Petrosyan (“Defendants”) demur to the four causes of action alleged against them for failure to state facts sufficient to constitute a cause of action and uncertainty, pursuant to Code of Civil Procedure section 430.10, subdivisions (e) and (f), respectively.  Defendants also move to strike Plaintiffs’ allegations of, and the request for, punitive damages.

Plaintiffs oppose the demurrer and Defendants reply.

ANALYSIS

1.      DEMURRER

“It is black letter law that a demurrer tests the legal sufficiency of the allegations in a complaint.”  (Lewis v. Safeway, Inc. (2015) 235 Cal.App.4th 385, 388.)  In testing the sufficiency of a cause of action, a court accepts “[a]s true all material facts properly pled and matters which may be judicially noticed but disregard contentions, deductions or conclusions of fact or law.  [A court also gives] the complaint a reasonable interpretation, reading it as a whole and its parts in their context.”  (290 Division (EAT), LLC v. City & County of San Francisco (2022) 86 Cal.App.5th 439, 450 [cleaned up]; Hacker v. Homeward Residential, Inc. (2018) 26 Cal.App.5th 270, 280 [“in considering the merits of a demurrer, however, “the facts alleged in the pleading are deemed to be true, however improbable they may be”].)

Further, in ruling on a demurrer, a court must “liberally construe” the allegations of the complaint “with a view to substantial justice between the parties.”  (See Code Civ. Proc., § 452.)  “This rule of liberal construction means that the reviewing court draws inferences favorable to the plaintiff, not the defendant.”  (Perez v. Golden Empire Transit Dist. (2012) 209 Cal.App.4th 1228, 1238.)  

In summary, “[d]etermining whether the complaint is sufficient as against the demurrer on the ground that it does not state facts sufficient to constitute a cause of action, the rule is that if one consideration of all the facts stated it appears the plaintiff is entitled to any relief at the hands of the court against the defendants the complaint will be held good although the facts may not be clearly stated, or may be intermingled with a statement of other facts irrelevant to the cause of action shown, or although the plaintiff may demand relief to which he is not entitled under the facts alleged.”  (Gressley v. Williams (1961) 193 Cal.App.2d 636, 639.)

A.    UNCERTAINTY

A demurrer for uncertainty will be sustained only where the pleading is so bad that the responding party cannot reasonably respond - i.e., he or she cannot reasonably determine what issues must be admitted or denied, or what claims are directed against him or her.  (Khoury v. Maly’s of California (1993) 14 Cal.App.4th 612, 616.)  Where a demurrer is made upon the ground of uncertainty, the demurrer must distinctly specify exactly how or why the pleading is uncertain, and where such uncertainty appears by reference to page and line numbers.  (See Fenton v. Groveland Comm. Services Dist. (1982) 135 Cal.App.3d 797, 809.) 

Defendants argue that each cause of action alleged in the FAC is uncertain because the allegations conflate Defendant Petrosyan and Defendant LA Solar.  Petrosyan is alleged to be the Responsible Managing Officer, Chief Executive Officer, President, and alter ego of Defendant LA Solar (FAC ¶¶ 4, 9.)  Thus, Defendants do not demonstrate that any portions of the FAC are so bad that they cannot reasonably determine what issues must be admitted or denied, or what claims are directed against them.  The Court thus declines to sustain Defendants’ demurrer on the basis of uncertainty. 

B.     FAILURE TO STATE A CAUSE OF ACTION

                                                                    i.            First Cause of Action – Breach of Express Warranty

“[T]o prevail on a breach of express warranty claim, the plaintiff must prove (1) the seller's statements constitute an affirmation of fact or promise or a description of the goods; (2) the statement was part of the basis of the bargain; and (3) the warranty was breached.  (Weinstat v. Dentsply Internat., Inc. (2010) 180 Cal.App.4th 1213, 1227.)

Here, Plaintiffs allege (1) Section II(C)(4) of the Contract provides a “Roof Penetrations Warranty” warranting roof leaks for 10 years related to solar installation (FAC ¶ 14); (2) “In executing the Contract, Plaintiffs relied on the express and Defendants breached this warranty by failing to repair the roof leak caused by improper solar installation (FAC ¶ 15); and (3) Defendants repeatedly attempted but ultimately failed to repair the damage and water leaks caused by the improper solar installation (FAC ¶¶ 21-37.)

Defendants contend that Plaintiffs have failed to allege facts sufficient to constitute a cause of action against Petrosyan.  However, as discussed above, Plaintiffs allege Petrosyan and Defendant LA Solar are alter egos.  Therefore, Plaintiff has adequately alleged a cause of action for breach of express warranty against Defendant Petrosyan.

                                                                  ii.            Second Cause of Action – Negligence

“The elements of any negligence cause of action are duty, breach of duty, proximate cause, and damages.”  (Peredia v. HR Mobile Services, Inc. (2018) 25 Cal.App.5th 680, 687.)

Here, with regard to duty, the FAC alleges:

The contractual obligation with Plaintiffs created a legal duty the breach of which support this negligence claim.

51.  The contract between Plaintiffs and Defendant Solar gave rise to a duty of care that required that such services be performed in a competent and reasonable manner. Defendants’ failure to do so is both a breach of contract and a tort.

(FAC ¶¶ 50-51.)

            As for breach and causation, the FAC alleges:

49. Defendants negligently designed, constructed, installed and maintained the Project and such negligence proximately caused water leaks in the roof and resulted in water damage to Plaintiffs.

(FAC ¶ 49.)

            And as for Damages, the FAC alleges:

53. As a proximate result of the negligence of Defendant Solar, Plaintiffs have been damaged in an amount no less than $90,000.

(FAC ¶ 53.)

            Defendants again argue that Plaintiffs fail to state facts sufficient to state a cause of action against Petrosyan, but as discussed above, Plaintiffs adequately allege that Defendant LA Solar is the alter ego of Petrosyan.

            Therefore, Plaintiffs adequately state a breach of contract claim against Petrosyan.

                                                                iii.            Third Cause of Action – Breach of Contract

“To prevail on a cause of action for breach of contract, the plaintiff must prove (1) the contract, (2) the plaintiff's performance of the contract or excuse for nonperformance, (3) the defendant's breach, and (4) the resulting damage to the plaintiff.”  (Richman v. Hartley (2014) 224 Cal.App.4th 1182, 1186.) 

Here, the FAC alleges that Plaintiffs and Defendants entered into a contract for solar installation, which Defendants breached by failing to honor the warranty provision in the contract.

Defendants argue that Plaintiffs have failed to state facts sufficient to constitute a cause of action against Petrosyan, because Plaintiffs only allege conclusory allegations that Petrosyan is the alter ego of LA Solar.  As discussed above, Plaintiff’s alter ego allegations suffice at this stage of the litigation.

                                                                iv.            Fourth Cause of Action – Fraud

“In a promissory fraud action, to sufficiently alleges [sic] defendant made a misrepresentation, the complaint must allege (1) the defendant made a representation of intent to perform some future action, i.e., the defendant made a promise, and (2) the defendant did not really have that intent at the time that the promise was made, i.e., the promise was false.”  (Beckwith v. Dahl (2012) 205 Cal.App.4th 1039, 1060.)   

“In California, fraud must be pled specifically; general and conclusory allegations do not suffice.”  (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.)  “This particularity requirement necessitates pleading facts which show how, when, where, to whom, and by what means the representations were tendered.”  (Ibid.) 

“One of the purposes of the specificity requirement is notice to the defendant, to furnish the defendant with certain definite charges which can be intelligently met.”  (Alfaro v. Community Housing Improvement System & Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, 1384.)  As such, less specificity is required “when it appears from the nature of the allegations that the defendant must necessarily possess full information concerning the facts of the controversy[.]”  (Ibid.)  “Even under the strict rules of common law pleading, one of the canons was that less particularity is required when the facts lie more in the knowledge of the opposite party.”  (Ibid.)

Defendants argue that Plaintiffs fail to plead fraud with requisite specificity.  Plaintiffs’ allegations of fraud are as follows:

60. The aforesaid representations and warranties were in fact false at the time they were made. Plaintiffs are informed and believe, and based on such information and belief allege, that in actuality Defendants never had any intention of performing the terms of the Warranty and that Defendants’ written statements to Plaintiffs were all false and intended to induce Plaintiffs to enter into the Contract.

61. Plaintiffs are informed and believe, and based on such information and belief allege, that other claims have been made against Defendants and Defendants do not honor the terms of its Warranty. Plaintiffs are informed and believe that the California State Contractors License Board has commenced proceedings against Defendant Solar relating to its defective work. The CSLB has filed an Accusation (Case No. N2021-152) against Defendants that alleges claims similar to those here, in part that:

“LA Solar failed to properly install the flashings, racking, and solar panels on multiple occasions resulting in a large number of penetrations to the roofing system and excessive wear and tear on the roof due to foot traffic.”

62. The CSLB Accusation against Defendants arises out of a contract executed on or about October 29, 2019, before the Contract executed by Plaintiffs. The CSLB accused Defendants of willfully departing from accepted trade standards for good and workmanlike construction.

63. The CSLB had also previously issued Citation No. 2-2019-1537 against Defendants and had ordered Defendants to pay restitution to the homeowner.

64. Plaintiffs are informed and believe, and based on such information and belief allege, that when Defendants made the aforesaid Warranty, they knew they had no intention of performing the Warranty and that Defendants had a history of violations of applicable standards.

65. Plaintiffs were ignorant of the falsity of Defendants’ promises and representations and did not discover the falsity until the roof began to leak

66. Had Plaintiffs known the true facts, they would not have agreed to enter into the Contract with Defendant Solar.

67. As a proximate result of the above-described conduct of Defendants, Plaintiffs have been damaged in the sum of at least $90,000 in accordance with their proof.

68. Plaintiffs are informed and believe, and based on such information and belief allege, that the aforesaid conduct of Defendants occurred deliberately and intentionally, with fraud, oppression and malice, and with a conscious and callous disregard of the rights of Plaintiffs, so that Plaintiffs are entitled to recover punitive damages from Defendants.

(FAC ¶¶ 60-68.) 

With regard to the allegations made “on information and belief,” allegations made “on information and belief” are insufficient to satisfy the heightened pleading requirement “unless the facts upon which the belief is founded are stated in the pleading.”  (Dowling v. Spring Val. Water Co. (1917) 174 Cal.218, 221.)

The Court agrees that Plaintiffs fail to allege facts to support the fraud cause of action with requisite specificity.  The only specific facts alleged pertain to Defendants’ improper solar installation, not Defendants’ knowledge or intent not to perform at the time the promise was made.

Therefore, the Court sustains Defendants’ demurrer to the fourth cause of action for fraud.

2.      MOTION TO STRIKE

Any party, within the time allowed to respond to a pleading, may serve and file a motion to strike the whole pleading or any part thereof.  (Code Civ. Proc., § 435, subd. (b)(1); Cal. Rules of Court, rule 3.1322, subd. (b).)  On a motion to strike, the court may: (1) strike out any irrelevant, false, or improper matter inserted in any pleading; or (2) strike out all or any part of any pleading not drawn or filed in conformity with the laws of California, a court rule, or an order of the court.  (Code Civ. Proc., § 436, subd. (a)-(b); Stafford v. Shultz (1954) 42 Cal.2d 767, 782.)  Here, Chan moves to strike from the complaint, references to and claims for punitive damages.    

In ruling on a motion to strike punitive damages, “judges read allegations of a pleading subject to a motion to strike as a whole, all parts in their context, and assume their truth.”  (Clauson v. Superior Court (1998) 67 Cal.App.4th 1253, 1255.)  To state a prima facie claim for punitive damages, a plaintiff must allege the elements set forth in the punitive damages statute, Civil Code section 3294.  (College Hosp., Inc. v. Superior Court (1994) 8 Cal.4th 704, 721.)  Per Civil Code section 3294, a plaintiff must allege that the defendant has been guilty of oppression, fraud, or malice.  (Civ. Code, § 3294, subd. (a).)   As set forth in the Civil Code,

(1) “Malice” means conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.  (2) “Oppression” means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person's rights.  (3) “Fraud” means an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.

(Civ. Code, § 3294, subd. (c)(1)-(3), emphasis added.) 

Further, a plaintiff must assert facts with specificity to support a conclusion that a defendant acted with oppression, fraud or malice.  To wit, there is a heightened pleading requirement regarding a claim for punitive damages.  (See Smith v. Superior Court (1992) 10 Cal.App.4th 1033, 1041-1042.)  “When nondeliberate injury is charged, allegations that the defendant’s conduct was wrongful, willful, wanton, reckless or unlawful do not support a claim for exemplary damages; such allegations do not charge malice.  When a defendant must produce evidence in defense of an exemplary damage claim, fairness demands that he receive adequate notice of the kind of conduct charged against him.” (G. D. Searle & Co. v. Superior Court (1975) 49 Cal.App.3d 22, 29 [cleaned up].)  In Anschutz Entertainment Group, Inc. v. Snepp, the Court of Appeal noted that the plaintiffs’ assertions related to their claim for punitive damages were “insufficient to meet the specific pleading requirement.”  (Anschutz Entertainment Group, Inc. v. Snepp (2009) 171 Cal.App.4th 598, 643 [plaintiffs alleged “the conduct of Defendants was intentional, and done willfully, maliciously, with ill will towards Plaintiffs, and with conscious disregard for Plaintiff's rights. Plaintiff's injuries were exacerbated by the malicious conduct of Defendants. Defendants' conduct justifies an award of exemplary and punitive damages”]; see also Grieves v. Superior Court (1984) 157 Cal.App.3d 159, 166 [“The mere allegation an intentional tort was committed is not sufficient to warrant an award of punitive damages.  Not only must there be circumstances of oppression, fraud, or malice, but facts must be alleged in the pleading to support such a claim”].) 

Moreover, “the imposition of punitive damages upon a corporation is based upon its own fault.  It is not imposed vicariously by virtue of the fault of others.”  (City Products Corp. v. Globe Indemnity Co. (1979) 88 Cal.App.3d 31, 36.)  “Corporations are legal entities which do not have minds capable of recklessness, wickedness, or intent to injure or deceive.  An award of punitive damages against a corporation therefore must rest on the malice of the corporation’s employees.  But the law does not impute every employee’s malice to the corporation.  Instead, the punitive damages statute requires proof of malice among corporate leaders:  the officers, directors, or managing agents.”  (Cruz v. Home Base (2000) 83 Cal.App.4th 160, 167 [cleaned up].) 

Here, as discussed above, Plaintiffs have not alleged facts with requisite specificity to state a cause of action for fraud against Defendants.  As such, the Court finds that the allegations similarly do not adequately support a claim for punitive damages.    

3.      LEAVE TO AMEND

A plaintiff has the burden of showing in what manner the complaint could be amended and how the amendment would change the legal effect of the complaint, i.e., state a cause of action. (See The Inland Oversight Committee v City of San Bernardino (2018) 27 Cal.App.5th 771, 779; PGA West Residential Assn., Inc. v Hulven Int'l, Inc. (2017) 14 Cal.App.5th 156, 189.) A plaintiff must not only state the legal basis for the amendment, but also the factual allegations sufficient to state a cause of action or claim. (See PGA West Residential Assn., Inc. v Hulven Int'l, Inc., supra, 14 Cal.App.5th at p. 189.) Moreover, a plaintiff does not meet his or her burden by merely stating in the opposition to a demurrer or motion to strike that “if the Court finds the operative complaint deficient, plaintiff respectfully requests leave to amend.” (See Major Clients Agency v Diemer (1998) 67 Cal.App.4th 1116, 1133; Graham v Bank of America (2014) 226 Cal.App.4th 594, 618 [asserting an abstract right to amend does not satisfy the burden].)

Here, Plaintiffs have failed to meet their burden as the opposition does not specify any additional specific facts Plaintiffs could add to cure these deficiencies.    

CONCLUSION AND ORDER

For the reasons stated, the Court overrules Defendants’ Demurrers to the First, Second, and Third Causes of Action, and sustains without leave to amend Defendants’ Demurrer to the Fourth Cause of Action. 

Further, the Court grants Defendants’ Motion to Strike in its entirety, and orders the following stricken from the FAC:

·         Paragraph 68, at page 12, lines 17 to 20, which reads as follows: “Plaintiffs are informed and believe, and based on such information and belief allege, that the aforesaid conduct of Defendants occurred deliberately and intentionally, with fraud, oppression and malice, and with a conscious and callous disregard of the rights of Plaintiffs. So that Plaintiffs are intitled to recover punitive damages from Defendants.”

·         The portion of Plaintiffs' prayer for damages, set forth at page 13, line 16, which reads as follows: "4. For punitive damages;”

Further, the Court orders Defendants to file an Answer to the FAC on or before March 29, 2024. 

Defendants shall provide notice of the Court’s ruling and file a proof of service regarding the same. 

DATED:  March 7, 2024                                                        ___________________________

                                                                                          Michael E. Whitaker

                                                                                          Judge of the Superior Court