Judge: Michael E. Whitaker, Case: 24SMCV00413, Date: 2024-07-30 Tentative Ruling

Case Number: 24SMCV00413    Hearing Date: July 30, 2024    Dept: 207

TENTATIVE RULING

MOTIONS

On April 17, 2024, Plaintiffs Ocean Promenade, Inc. dba Ocean View Hotel and Pacificside, Inc. dba Santa Monica Hotel (“Plaintiffs”) filed the operative First Amended Complaint (“FAC”) against Defendants Ritz Flooring, Inc. (“Ritz”); Mordecai Notis (“Notis”); and Navigators Insurance Company (“Navigators”) alleging five causes of action for (1) Breach of Contract; (2) Negligence; (3) Fraud; (4) Negligent Misrepresentation; and (5) Complaint Against Contractor’s Bond.

Defendants Ritz and Notis (“Moving Defendants”) now demur to all five causes of action on the grounds that they fail to state facts sufficient to constitute a cause of action and are uncertain, pursuant to Code of Civil Procedure section 430.10, subdivisions (e) and (f), respectively.  In addition, Moving Defendants move to strike Plaintiffs’ allegations regarding and request for punitive damages.

Plaintiffs untimely opposed both motions, but the Court continued the hearing to give Moving Defendants an opportunity to file reply briefs.

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 on 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

“[D]emurrers for uncertainty are disfavored.”  (Lickiss v. Financial Industry Regulatory Authority (2012) 208 Cal.App.4th 1125, 1135.)  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.) 

Moving Defendants argue that the first cause of action for breach of contract is uncertain, because the FAC does not allege the material terms of the contract(s) at issue.  The FAC alleges:

32. Between October 8, 2020, and January 6, 2023, Plaintiffs entered into the Contracts with Defendants wherein Defendants agreed to supply and install recommended flooring material at Plaintiffs’ hotels at prices stated in the Contracts.

(FAC ¶ 32.)  Thus, the Court finds that the basic terms of the contract(s) at issue are alleged in the FAC.

            Moving Defendants argue the second cause of action for negligence is uncertain because it is unclear what Plaintiffs allege Defendants did wrong.  The FAC alleges:

44. Defendants have breached their duty and negligently performed their services by failing to cause the flooring installation to be completed in a proper and workmanlike manner.

(FAC ¶ 44.)  Therefore, the breach alleged is not uncertain.

            Moving Defendants do not raise any arguments that the remaining causes of action are uncertain.

            Ultimately, Moving Defendants do not demonstrate that any portions of the FAC are so bad that Moving Defendants cannot reasonably determine what issues must be admitted or denied, or what claims are directed against them.  The Court thus declines to sustain Moving Defendants’ demurrer on the basis of uncertainty.

B.    FAILURE TO STATE A CAUSE OF ACTION

                                                         i.          First 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.) 

Moving Defendants argue that because the invoices attached to the FAC indicate they were issued by Ritz, as opposed to Notis, Plaintiffs fail to state a breach of contract claim against Notis.  The FAC alleges:

6. Plaintiffs are informed and believe, and based thereon allege that at all times herein mentioned, Defendant MORDECAI NOTIS (hereinafter “Notis”) is an individual and at all times relevant herein was conducting business in the County of Los Angeles, State of California and is one of the owners, responsible party, managing partner, controlling shareholder, CEO, and/or President, or otherwise directs and controls defendant Ritz.

7. Since July 29, 2024, Defendant Notis has been the Responsible Managing Officer (“RMO”) for Defendant Ritz and acting as the sole qualifier for Defendant Ritz’s California Contractor’s license.

8. As the RMO of Defendant Ritz and pursuant to California Business and Professions Code Section 7068.1 Defendant Notis is “…responsible for exercising supervision and control of their employer's or principal's construction operations to secure compliance with this chapter and the rules and regulations of the board.”

9. As the RMO of Defendant Ritz, Defendant Notis has personal liability for the wrongdoing of Defendant Ritz based upon Defendant Notis’ direct participation and decision making, authorization, and direction, in the wrongdoing alleged herein. Michaelis v. Benavides, 71 Cal. Rptr. 2d 776, 779 (Cal. App. 2d Dist. 1998).

[…]

13. Plaintiffs are informed and believe, and thereupon allege that each defendant was the agent, servant, and employee of the other defendants, and each of them, and in committing the acts and omissions herein mentioned was acting within the course and scope of said agency, servitude and employment. At all times mentioned herein, each defendant was chargeable and bound by the knowledge and information received by and on behalf of each other defendant.

14. Plaintiffs are informed and believe and thereon allege that Ritz is, and at all times herein mentioned was, a mere shell and sham without sufficient capital, assets, and/or insurance coverage considering the business done by Ritz; that Ritz is, and at all times mentioned herein was, conceived, intended, and used by Notis, and Does 1-50 as a device to avoid individual liability by means of substituting a financially insolvent and inadequately capitalized and/or insured business entity in place of said beneficial owners; that there exists, and at all times mentioned herein has existed, a unity of interest and ownership between Defendants such that any separateness has ceased to exist between them; that Notis, and Does 1-50 have used assets of Ritz for personal use, have caused the assets of Ritz to be transferred to them without adequate consideration, and have withdrawn funds from Ritz’s bank accounts for personal use that Notis, and Does 1-50 manipulated the assets and liabilities of Ritz so that the assets were concentrated in persons and/or entities other than Ritz; that Ritz was a mere shell, instrumentality, and conduit through which Notis, and Does 1-50 carried business in the entity’s names exactly as they had previous to incorporation, exercising complete dominance and control of such business to such an extent that any individuality or separateness of Defendants would permit abuse of the corporate privilege and would sanction fraud and injustice in that said person, through their control, domination and manipulation of Ritz have purposely sought to insulate themselves from liability for wrongful acts and to substitute in their place a shell lacking adequate capital when assessed in light of the activities of Ritz, thereby rendering Ritz insolvent and unable to meet its obligations.

15. All of the acts of the defendants, and each of them, were ratified and adopted by the acts of their co-defendants, and each of them.

16. Between October 8, 2020, and January 6, 2023, Plaintiff Ocean Prominade hired Defendants Ritz and Notis to supply and install flooring material at Ocean Prominade’s property based upon prices stated in the invoices. The invoices are attached and incorporated hereto as Exhibit “1.”

17. Between May 21, 2021, and May 26, 2022, Plaintiff Pacificside hired Defendants Ritz and Notis to supply and install flooring material at Pacificside’s property based upon prices stated in the invoices. The invoices are attached and incorporated hereto as Exhibit “2.” (Exhibits “1” and “2” are collectively referred to as the “Contracts”).

18. Prior to the selection of the LVP flooring, Defendant Ritz and Notis recommended to Plaintiffs that the LVP flooring was the appropriate material to install and utilize at Plaintiffs’ hotels.

19. As a flooring contractor, when the recommendation was made, Defendant Ritz and Notis knew that the LVP flooring was not the appropriate material to install and utilize at Plaintiffs’ hotels.

20. Prior to the work commencing, Defendants Ritz and Notis provided the invoices (contracts) to Plaintiffs specifically recommending the material and stating the cost of the material including the installation thereof. Thereafter, Plaintiffs would review the invoices and approve them prior to work commencing.

21. Based upon Defendants Ritz and Notis’ representations, Plaintiffs installed LVP flooring at both locations. Plaintiffs relied on Defendants Ritz and Notis’ recommendation regarding the type of flooring material to install. As further alleged below, the flooring material recommended and suggested was not the appropriate material to install in hotels.

22. Almost immediately following installation of the flooring materials Plaintiffs began noticing numerous problems with the installed flooring materials, including but not limited to, cracking, splitting, unlevel finish, and floating flooring materials. Additionally, the installed flooring materials exhibited excessive noise, which is unacceptable for hotels.

23. Following installation, the problems with the flooring materials were brought to Defendants Ritz and Notis’ attention at which time, numerous repairs were attempted by Ritz and Notis. Unfortunately, these repairs were not successful and the floors continued exhibiting the same problems.

24. Finally, Ritz and Notis admitted the flooring material recommended was not appropriate for a hotel setting and was rather designed for apartments. Following this admission, Ritz and Notis offered to sell Plaintiffs more expensive flooring which would be appropriate for a hotel.

25. In entering into the Contracts, Defendants Ritz and Notis implicitly promised to provide flooring materials which met the standard of care set by professionals in the construction industry for flowing materials in hotel settings.

26. Plaintiffs reasonably relied on both the implicit and explicit contractual promises by Defendants Ritz and Notis in entering into the contracts and paying Defendants.

27. Defendants, and each of them, intentionally misled Plaintiffs in order to induce Plaintiffs to hire them.

28. As a direct and proximate result of the foregoing acts, conduct and/or omissions of the Defendants, and each of them, said defects have caused, and continue to cause, resultant damage to the component parts of construction. Additionally, said defects constituted a life safety issue, including but not limited to, constituting trip hazards to Plaintiffs’ employees and customers, and require repair and replacement.

29. Plaintiffs have further been damaged in the nature of the costs incurred to repair the work agreed to be performed by the Defendants and the cost to repair consequential damage to the Plaintiffs’ property, purchase materials, and pay for permits; all in a sum in excess of $250,000.00 together with interest thereon at the legal rate according to proof.

30. As a direct and proximate result of Defendants’ actions as herein alleged, Plaintiffs have further been damaged by the loss of use of the properties and hotel rooms, including lost profit in being unable to rent the affected hotel rooms during attempted repairs and until proper repairs can take place in the affected rooms all in a sum in excess of $250,000.00 together with interest thereon at the legal rate according to proof.

[…]

32. Between October 8, 2020, and January 6, 2023, Plaintiffs entered into the Contracts with Defendants wherein Defendants agreed to supply and install recommended flooring material at Plaintiffs’ hotels at prices stated in the Contracts.

33. Defendants began performing the services under these Contracts.

34. Plaintiffs have performed all conditions precedent, if any, to Defendants’ bargained for and due performance under the Contracts, and further, Plaintiffs have performed all conditions, covenants and promises required to be performed, unless excused, on their part under the Contracts.

35. Defendants implicitly agreed to perform their work, labor, and/or services in a good and workmanlike manner in accordance with all operative codes, rules, and regulations.

36. Plaintiffs are informed and believe and thereon allege that the Defendants breached the Contracts as set forth in paragraphs 13 through 29 above, including, but not limited to performing work in a non-workmanlike manner, and recommending and installing inappropriate material in Plaintiffs’ hotels

37. As a direct and proximate result of the foregoing acts, conduct and/or omissions of the Defendants, and each of them, said defects have caused, and continue to cause, resultant damage to the component parts of construction. Additionally, said defects constituted a life safety issue, including but not limited to, constituting trip hazards to Plaintiffs’ employees and customers, and require repair and replacement.

38. Plaintiffs have further been damaged in the nature of the costs incurred to repair the work agreed to be performed by the Defendants and the cost to repair consequential damage to the Plaintiffs’ property, purchase materials, and pay for permits; all in a sum in excess of $250,000.00 together with interest thereon at the legal rate according to proof.

39. As a direct and proximate result of Defendants’ actions as herein alleged, Plaintiffs have further been damaged by the loss of use of the properties and hotel rooms, including lost profit in being unable to rent the affected hotel rooms during attempted repairs and until proper repairs can take place in the affected rooms all in a sum in excess of $250,000.00 together with interest thereon at the legal rate according to proof.

(FAC ¶¶ 6-9, 13-39.)

Thus, Plaintiffs have adequately alleged breach of contract as to Notis.

                                                       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.)

The FAC alleges:

41. Plaintiffs are informed and believe and thereon allege that Defendants knew, or should have known, that if the improper flooring was installed and/or not properly or adequately installed, that the Plaintiffs would be substantially damaged thereby, including loss of use, and lost profits, and that installed floors would be defective and not of merchantable quality.

42. Defendants were under a duty to exercise ordinary and reasonable care, to avoid reasonably foreseeable injuries to Plaintiffs, and knew or should have known with reasonable certainty that Plaintiffs would suffer the monetary damages set forth herein if Defendants failed to perform their duty to cause the construction to be completed in a proper and workmanlike manner.

43. Pursuant to California Business and Professions Code Section 7109(a), Defendants were under a duty to exercise ordinary and reasonable care, to avoid reasonably foreseeable injuries to Plaintiffs, and knew or should have known with reasonable certainty that Plaintiffs would suffer the monetary damages set forth herein if Defendants failed to perform their duty to cause the construction to be completed in a proper and workmanlike manner.

44. Defendants have breached their duty and negligently performed their services by failing to cause the flooring installation to be completed in a proper and workmanlike manner. Defendants’ negligent work has resulted in damage to adjacent parts of the properties and caused further damages which both needed to be repaired at additional cost.

45. As a direct and proximate result of the foregoing acts, conduct and/or omissions of the Defendants, and each of them, said defects have caused, and continue to cause, resultant damage to the component parts of construction. Additionally, said defects constituted a life safety issue, including but not limited to, constituting trip hazards to Plaintiffs’ employees and customers, and require repair and replacement.

46. Plaintiffs have further been damaged in the nature of the costs incurred to repair the work agreed to be performed by the Defendants and the cost to repair consequential damage to the Plaintiffs’ property, purchase materials, and pay for permits; all in a sum in excess of $250,000.00 together with interest thereon at the legal rate according to proof.

47. As a direct and proximate result of Defendants’ actions as herein alleged, Plaintiffs have further been damaged by the loss of use of the properties and hotel rooms, including lost profit in being unable to rent the affected hotel rooms during attempted repairs and until proper repairs can take place in the affected rooms all in a sum in excess of $250,000.00 together with interest thereon at the legal rate according to proof.

(FAC ¶¶ 41-47.)  Therefore, Plaintiffs have adequately stated a cause of action for negligence.

                                                     iii.          Third and Fourth Causes of Action – Fraud and Negligent Misrepresentation

The elements for fraudulent misrepresentation are “(1) the defendant represented to the plaintiff that an important fact was true; (2) that representation was false; (3) the defendant knew that the representation was false when the defendant made it, or the defendant made the representation recklessly and without regard for its truth; (4) the defendant intended that the plaintiff rely on the representation; (5) the plaintiff reasonably relied on the representation; (6) the plaintiff was harmed; and (7) the plaintiff's reliance on the defendant's representation was a substantial factor in causing that harm to the plaintiff.”  (Graham v. Bank of America, N.A. (2014) 226 Cal.App.4th 594, 605–606.) 

“The essential elements of a count for negligent misrepresentation are the same [as intentional misrepresentation] except that it does not require knowledge of falsity but instead requires a misrepresentation of fact by a person who has no reasonable grounds for believing it to be true.”  (Chapman v. Skype Inc. (2013) 220 Cal.App.4th 217, 230-231 (hereafter Chapman).)  Like intentional misrepresentation, causes of action for negligent misrepresentation sound in fraud, and must also, therefore, be pleaded with particularity.  (Ibid.) 

“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.)

Moving Defendants demur to the third and fourth causes of action on the grounds that they are not pleaded with requisite specificity.  As to the Third Cause of Action, the FAC alleges:

49. Prior to entering into the Contracts, and before any work was performed on the Subject Property, Defendants, represented to Plaintiff that the installed LVP flooring was the appropriate flooring materiel to utilize in Plaintiffs’ hotels.

50. The representation and suggestion that the installed LVP flooring was the proper material to use in a hotel setting was false when made and each of Defendants knew the Misrepresentations were false at the time that they made them.

51. Defendants made the misrepresentations with regard to the installed LVP flooring with the intention of defrauding Plaintiffs and inducing Plaintiffs to rely upon the Misrepresentations in contracting with Defendants to do the Work.

52. Plaintiffs were ignorant of the true facts concerning Defendants’ Misrepresentations. If Plaintiffs had known the truth about the Misrepresentations, Plaintiffs would never have agreed to contract with Defendants for the installed LVP flooring and would have taken steps to prevent the use of substandard materials at its hotels.

53. Plaintiffs relied upon the false statements made by entering into the Contracts and Permitting Defendants to continue to perform work.

54. Defendant RITZ FLOORING, INC., by and through its corporate officers, directors, and managing agents, presently unknown to Plaintiffs and according to proof at the time of trial, ratified the misconduct and statements alleged herein in that they were aware that Defendant RITZ FLOORING, INC. improperly recommended the use of the installed LVP flooring. That notwithstanding this knowledge, these officers, directors, and/or managing agents meaningfully disregarded these issues even though they knew this would lead to unnecessary damages to Plaintiff.

55. Plaintiffs have further been damaged in the nature of the costs incurred to repair the work agreed to be performed by the Defendants and the cost to repair consequential damage to the Plaintiffs’ property, purchase materials, and pay for permits; all in a sum in excess of $250,000.00 together with interest thereon at the legal rate according to proof.

56. As a direct and proximate result of Defendants’ actions as herein alleged, Plaintiffs have further been damaged by the loss of use of the properties and hotel rooms, including lost profit in being unable to rent the affected hotel rooms during attempted repairs and until proper repairs can take place in the affected rooms all in a sum in excess of $250,000.00 together with interest thereon at the legal rate according to proof.

57. In doing the acts alleged herein, Defendants, and each of them, acted fraudulently and with malice, oppression, and the intention of depriving Plaintiff s of their property, legal rights, and otherwise causing injury to Plaintiff. This conduct was despicable and conducted with the willful and conscious disregard for the rights of Plaintiffs, thereby resulting in injury justifying an award of exemplary and punitive damages.

(FAC ¶¶ 49-57.)  Similarly, the FAC alleges as to the fourth cause of action:

58. The allegations of paragraphs 1 through 57 are incorporated by reference and realleged herein.

59. At the time said Defendants, and each of them, made the representations as herein alleged, including the representations that the installed LVP flooring was appropriate for hotel use, the Defendants knew these representations were untrue and the said Defendants, and each of them, did not have sufficient knowledge and/or they did not possess a sufficient factual basis upon which to make said representations, and they knew that Plaintiffs would rely on said representations as if they were true and correct in making their decision to enter into the Contracts with Defendants.

60. In making said representations, the said Defendants, and each of them, acted in a negligent and careless manner and knew or should have known that these negligent misrepresentations made to Plaintiffs were likely to be relied on by Plaintiffs and would mislead Plaintiffs (and they did in fact mislead Plaintiffs) such that based thereon Plaintiffs agreed to enter into the Contracts with Defendants.

61. At the times these misrepresentations were made, and at the times Plaintiffs acted as described herein in reliance thereon, Plaintiffs were ignorant of their falsity, and of the existence of the true facts. Had Plaintiffs been aware of the falsity of the facts that said Defendants, and each of them, represented to Plaintiffs as being true, Plaintiffs would not have entered into the Contracts with Defendants.

62. Said misrepresentations were negligently made by the said Defendants, and each of them, with the intent that Plaintiffs would rely on them as true, which they did.

63. Plaintiffs have further been damaged in the nature of the costs incurred to repair the work agreed to be performed by the Defendants and the cost to repair consequential damage to the Plaintiffs’ property, purchase materials, and pay for permits; all in a sum in excess of $250,000.00 together with interest thereon at the legal rate according to proof.

64. As a direct and proximate result of Defendants’ actions as herein alleged, Plaintiffs have further been damaged by the loss of use of the properties and hotel rooms, including lost profit in being unable to rent the affected hotel rooms during attempted repairs and until proper repairs can take place in the affected rooms all in a sum in excess of $250,000.00 together with interest thereon at the legal rate according to proof.

(FAC ¶¶ 58-64.)

            Thus, in context, Plaintiffs allege that prior to entering into the contracts at issue, which were entered into between May 21, 2021 and May 26, 2022 (FAC ¶ 17), Defendants misrepresented to Plaintiffs that the LVP flooring was appropriate to install in Plaintiffs’ hotel.  Plaintiffs further allege that shortly following the installation, Moving Defendants admitted the flooring material was not suitable for hotels and was designed for apartments.  (FAC ¶ 24.)  This suggests that Moving Defendants either knew or should have known at the time they made the misrepresentation that it was false.  Further, the misrepresentation appears calculated to induce Plaintiffs to purchase the flooring at issue and hire Moving Defendants to do the installation.

            As such, Plaintiffs have pleaded the third and fourth causes of action with requisite particularity.

                                                     iv.          Fifth Cause of Action – Complaint Against Contractor’s Bond

Moving Defendants demur to the fifth cause of action on the grounds that “Complaint Against Contractor’s Bond” is a remedy, not an independent cause of action, citing to Nakash v. Superior Court (1987) 196 Cal.App.3d 59; Wilson & Wilson v. City Council of Redwood City (2011) 191 Cal.App.4th 1559; McDowell v. Watson (1997) 59 Cal.App.4th 1155; R.A. Vending Services, Inc. v. City of Los Angeles (1985) 172 Cal.App.3d 1188.  The Court finds those appellate opinions to be distinguishable and do not stand for the proposition that the Moving Defendants seek to advance.  (See, e.g., FNB Mortg. Corp. v. Pacific General Group (1999) 76 Cal.App.4th 1116, 1132 [“Language used in any opinion is of course to be understood in light of the facts and the issue before the court, and an opinion is not authority for a proposition not therein considered”].) 

In opposition, Plaintiffs cite to Code of Civil Procedure section 996.430 which provides in relevant part:  “The liability on a bond may be enforced by civil action.  Both the principal and the sureties shall be joined as parties to the action.   . . .   (c) A cause of action on a bond may be transferred and assigned as other causes of action.”   (See, e.g., National Technical Systems v. Commercial Contractors, Inc. (2001) 89 Cal.App.4th 1000, 1007 [“Liability on a bond may be enforced in a single civil action by the subcontractor in which both the principal and sureties are joined as parties to the action”].)  The Court finds Plaintiffs’ opposition to be persuasive.

Therefore, the Court overrules Moving Defendants’ demurrer to the fifth cause of action.

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.) 

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, Moving Defendants move to strike from the FAC, references to and claims for punitive damages.             

As discussed above, Plaintiffs have alleged their fraud-based causes of action with requisite specificity to withstand demurrer.  Further, Plaintiffs allege that the misrepresentations were made by Notis, as the responsible managing officer of Ritz.  Therefore, Moving Defendants’ motion to strike punitive damages from the FAC is denied.

CONCLUSION AND ORDER

For the reasons stated, the Court overrules Moving Defendants’ Demurrer to the First Amended Complaint in its entirety.  Further, the Court denies Moving Defendants’ Motion to Strike in its entirety. 

Further, the Court orders Moving Defendants to file and serve an Answer to the FAC on or before August 20, 2024. 

Moving Defendants shall provide notice of the Court’s ruling and file the notice with a proof of service forthwith. 

DATED:  July 30, 2024                                                          ___________________________

                                                                                          Michael E. Whitaker

                                                                                          Judge of the Superior Court