Judge: Michael E. Whitaker, Case: 24SMCV00562, Date: 2024-09-26 Tentative Ruling

Case Number: 24SMCV00562    Hearing Date: September 26, 2024    Dept: 207

TENTATIVE RULING

MOTIONS

On February 6, 2024, Plaintiff Michael Wolf, an individual doing business as Aquatic Life Service Co. (“Plaintiff”) filed suit against Defendant Harold Weiner (“Defendant”) alleging four causes of action for (1) breach of oral contract; (2) promissory estoppel; (3) promissory fraud; and (4) declaratory relief. 

Defendant now demurs to the first three causes of action pursuant to Code of Civil Procedure section 430.10, subdivisions (e), (f), and (g).  Defendant also moves to strike the request for punitive damages from the complaint.

Plaintiff opposes both motions and Defendant replies.

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.) 

Although Defendant argues “[t]he allegations are a mishmash of oral, written and implied by conduct contract formation but not a one of them is adequately pleaded[,]” Defendant does not demonstrate that any portions of the Complaint are so bad that Defendant cannot reasonably determine what issues must be admitted or denied or what claims are directed against him. 

The Court thus declines to sustain Defendant’s demurrer on the basis of uncertainty. 

B.    WHETHER THE CONTRACT IS WRITTEN, ORAL, or IMPLIED BY CONDUCT

The Complaint alleges as follows:

9. On July 2, 2023, PLAINTIFF met with WEINER met at the El Rincon Criollo restaurant in Culver City, California, to discuss PLAINTIFF’S purchase of WEINER’S book of business from his aquarium design, installation, and maintenance business (the “Business”) consisting of approximately 63 clients. Subsequent to PLAINTIFF’S meeting with WEINER, WEINER offered in writing to sell the Business to PLAINTIFF for the sum of $38,807. Subsequent to their meeting and WEINER’S offer, PLAINTIFF responded in writing that he accepted WEINER’S offer.

10. On July 14, 2023, PLAINTIFF made his first payment to WEINER for the “Pond” account from the Business. When WEINER inquired about the status of PLAINTIFF’S attorney preparing a more formal, written agreement, PLAINTIFF response included the statement: “Please understand no matter what I’m buying your accounts.”

11. In between July 14, 2023, and August 6, 2023, PLAINTIFF and WEINER discussed PLAINTIFF making a downpayment to WEINER for the purchase of the Business which would be deposited into an independent escrow. After PLAINTIFF found an escrow company to hold the downpayment, he advised WEINER of the same and escrow service price of $750 which PLAINITFF requested WEINER split with him. WEINER’S response was that he did not want to pay for the escrow and no longer wanted a downpayment.

12. On August 6, 2023, WEINER wrote to PLAINTIFF that WEINER’S last day of servicing clients in the Business would be December 31, 2023, and the cost to purchase the remaining book of business (60 clients) would be $38,405 with nonrefundable deposit of 50% due on September 1, 2023, and the balance paid on January 1, 2023. PLAINTIFF communicated his acceptance to WEINER on August 7, 2023.

13. On August 10, 2023, WEINER wrote to PLAINTIFF that, contrary to their previous discussion, WEINER did not want to turnover the Business website on October 1, 2023, and WEINER’S search engine optimization consultant on September 1, 2023, unless PLAINTIFF provided a downpayment. PLAINTIFF responded that he would pay the price to keep the website operational in October, November, and December 2023, and take possession of the same on January 1, 2024.

14. On September 28, 2023, WEINER wrote PLAINTIFF that WEINER wanted a significant, nonrefundable deposit by the end of October 2023 because WEINER was concerned about advising clients about retiring in November 2023. PLAINTIFF responded that he was ready to purchase WEINER’S remaining book of Business by buying portions of the book of Business every week in December 2023 as WEINER finished work on the accounts that were being sold to PLAINTIFF. WEINER expressed concern about PLAINTIFF retaining the search engine optimization consultant effective December 1, 2023, which PLAINTIFF agreed to do as well.

15. PLAINTIFF is informed and believes, and based thereon alleges, that after the September 28, 2023, exchange between PLAINTIFF and WEINER, and by at least October 7, 2023, WEINER began advising several of his existing clients that they would be serviced by PLAINTIFF.

16. On November 21, 2023, WEINER breached his agreement with PLAINTIFF when WEINER notified PLAINTIFF that WEINER was selling the remaining book of Business to a third party.

17. On December 28, 2023, PLAINTIFF, through counsel, made a written demand upon WEINER for compensation due to his unlawful conduct, but WEINER has refused and failed to respond to PLAINTIFF’S demand.

[…]

19. PLAINTIFF is informed and believes, and based thereon alleges, that, as a result of their negotiations as described above, PLAINTIFF, on the one hand, and DEFENDANTS, on the other hand, formed an oral agreement by which PLAINTIFF was going to buy the entirety of WEINER’S book of Business.

20. PLAINTIFF is informed and believes, and based thereon alleges, that, by November 21, 2023, PLAINTIFF had performed all conditions, covenants, and promises required on its part to be performed in accordance with the terms of the oral agreement except for those conditions, covenants, and promises which were excused by DEFENDANTS. and/or conditions, covenants, and promises which PLAINTIFF was prevented from performing by the acts or omissions to act on the part of DEFENDANTS.

21. PLAINTIFF is informed and believes, and based thereon alleges that, DEFENDANTS, and each of them, have subsequently breached the oral agreement by failing to sell PLAINTIFF the remainder of the book of Business for the agreed-upon price and on the terms described hereinabove.

22. PLAINTIFF is informed and believes, and based thereon alleges that, by selling the book of Business to a third party, DEFENDANTS, and each of them, have repudiated the oral agreement.

23. As a direct and proximate cause of the breach and repudiation of the oral agreement by DEFENDANTS, and each of them, PLAINTIFF has been damaged in a sum to be proven at trial, but in no event less than $500,000 in the form of lost profits that would have been generated by PLAINTIFF servicing the accounts that were to be sold to him by WEINER and DOES 1 through 20, inclusive, pursuant to said oral agreement.

(Complaint ¶¶ 9-23.)

            Although the Complaint alleges that following the parties’ July 2, 2023 meeting, Defendant made a written offer to sell the book of business to Plaintiff for $38,807 and Plaintiff accepted in writing, the essential terms of the agreement, such as the timing and amount of payments and the terms of escrow, were incomplete, thus Plaintiff does not allege a written agreement.  (See Complaint ¶ 11.)

            Subsequently, “[o]n August 6, 2023, WEINER wrote to PLAINTIFF that WEINER’S last day of servicing clients in the Business would be December 31, 2023, and the cost to purchase the remaining book of business (60 clients) would be $38,405 with nonrefundable deposit of 50% due on September 1, 2023, and the balance paid on January 1, 2023” to which “PLAINTIFF communicated his acceptance to WEINER on August 7, 2023.”  (Complaint ¶ 12.)  Thus, the parties entered into an oral agreement on August 7, 2023 for Plaintiff to purchase Defendant’s remaining book of business.  (See Complaint ¶ 19.) 

            The parties subsequently renegotiated various ancillary terms regarding the website (see Complaint ¶¶ 20-21.)  Then, the Complaint alleges “[o]n November 21, 2023, WEINER breached his agreement with PLAINTIFF when WEINER notified PLAINTIFF that WEINER was selling the remaining book of Business to a third party.”  (Complaint ¶ 16.) 

            Thus, although some of the allegations involve written offers, a written acceptance, and conduct in furtherance of an agreement, the Complaint adequately alleges the parties formed an oral contract.

C.    FAILURE TO STATE A CAUSE OF ACTION

                                                         i.          First Cause of Action – Breach of Oral 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.) 

As discussed above, the Complaint adequately alleges the existence of an oral contract for Plaintiff to purchase the remainder of Defendant’s book of business for $38,405, with 50% due on September 1, 2023, and the balance due on January 1.  (Complaint ¶ 12.) 

The Complaint further alleges that Defendant breached that agreement on November 21, 2023 by selling his remaining book of business to a third party.  (Complaint ¶ 16.) 

The Complaint further alleges that “by November 21, 2023,” the date of Defendant’s alleged breach, “PLAINTIFF had performed all conditions, covenants, and promises required on its part to be performed in accordance with the terms of the oral agreement except for those conditions, covenants, and promises which were excused by DEFENDANTS and/or conditions, covenants, and promises which PLAINTIFF was prevented from performing by the acts or omissions to act on the part of DEFENDANTS.”  (Complaint ¶ 20.) 

Finally, the Complaint alleges, “As a direct and proximate cause of the breach and repudiation of the oral agreement by DEFENDANTS, and each of them, PLAINTIFF has been damaged in a sum to be proven at trial, but in no event less than $500,000 in the form of lost profits that would have been generated by PLAINTIFF servicing the accounts that were to be sold to him by WEINER and DOES 1 through 20, inclusive, pursuant to said oral agreement.”  (Complaint ¶ 23.)

Therefore, the Complaint adequately alleges a cause of action for breach of oral contract.

                                                       ii.          Second Cause of Action – Promissory Estoppel

“The elements of a promissory estoppel claim are (1) a promise clear and unambiguous in its terms; (2) reliance by the party to whom the promise is made; (3) [the] reliance must be both reasonable and foreseeable; and (4) the party asserting the estoppel must be injured by his reliance.”  (Jones v. Wachovia Bank (2014) 230 Cal.App.4th 935, 945.)

Here, the Complaint alleges that Defendant offered to sell his remaining book of business to Plaintiff for $38,405, with 50% due on September 1, 2023, and the balance due on January 1.  (Complaint ¶ 12.) 

The Complaint further alleges, “PLAINTIFF relied on the promise made by DEFENDANTS, by, inter alia, making payments to WEINER for accounts transferred to PLAINTIFF that PLAINTIFF has serviced, hiring an attorney to prepare a written agreement for the sale of the book of Business, and preparing his employees to being servicing the remainder of the accounts to be transferred as part of PLAINTIFF’S purchase of the book of Business.”  (Complaint ¶ 26.)

Further, “PLAINTIFF is informed and believes, and based thereon alleges that his reliance on the promise made by DEFENDANTS was both reasonable and foreseeable by DEFENDANTS because, inter alia, WEINER had transferred some, but not all accounts to PLAINTIFF, had accepted payment from PLAINTIFF, and expected PLAINTIFF to incur legal fees in connection with the preparation of a written agreement between the parties.”  (Complaint ¶ 27.)

Finally, “As a direct and proximate result of PLAINTIFF’S reliance on the promise made by DEFENDANTS, PLAINTIFF has been damaged in a sum to be proven at trial, but in no event less than $500,000 in the form of lost profits that would have been generated by PLAINTIFF servicing the accounts that were to be sold to him by DEFENDANTS pursuant to said promise.”  (Complaint ¶ 28.)

Therefore, Plaintiff adequately alleges a cause of action for promissory estoppel.

                                                     iii.          Third Cause of Action – Promissory Fraud

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.) 

“In a promissory fraud action, to sufficiently allege[] 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.)

In addition to the specific allegations outlined above, the Complaint alleges:

30. PLAINTIFF is informed and believes, and based thereon alleges, that, by engaging in the acts described hereinabove, DEFENDANTS, and each of them, acting through WEINER, made a promise to PLAINTIFF regarding the sale of the book of Business to PLAINTIFF.

31. PLAINTIFF is informed and believes, and based thereon alleges, that DEFENDANTS, and each of them, did not intend to perform this promise when they made it to PLAINTIFF.

32. PLAINTIFF is informed and believes, and based thereon alleges, that DEFENDANTS, and each of them, intended that PLAINTIFF rely on this promise.

33. PLAINTIFF is informed and believes, and based thereon alleges, that he reasonably relied on DEFENDANTS’ promise.

34. DEFENDANTS did not perform the promised act in that DEFENDANTS, and each of them, refused to sell the remainder of the book of Business to PLAINTIFF, but instead sold it to a third party.

35. PLAINTIFF has been damaged in a sum to be proven at trial, but in no event less than $500,000 in the form of lost profits that would have been generated by PLAINTIFF servicing the accounts that were to be sold to him by DEFENDANTS pursuant to said false promise.

36. PLAINTIFF is informed and believes, and based thereon alleges, that his reliance on DEFENDANTS’ promise was a substantial factor in causing PLAINTIFF’S harm.

37. PLAINTIFF is informed and believes, and based thereon alleges, that the conduct of DEFENDANTS as described in this cause of action constitutes “fraud” as that term is used in Civil Code § 3294 and that, as a result, PLAINTIFF is entitled to punitive damages against DEFENDANTS and each of them.

(Complaint ¶¶ 30-37.)

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.)

Here, Plaintiff’s belief that Defendant did not intend to sell his book of business to Plaintiff when the offer was made is supported by the allegations regarding Defendant’s subsequent repeated attempts to renegotiate the terms of the sale, and ultimate sale to a third party. 

Further, Plaintiff’s belief that Defendant intended Plaintiff to rely upon the false promise is supported by the allegations that in reliance on the promise, and at Defendant’s request, Plaintiff paid to keep the website operational for October, November, and December of 2023.

Therefore, the Complaint alleges a cause of action for promissory fraud with requisite specificity. 

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”].) 

Here, as discussed above, Plaintiff has alleged facts with requisite specificity to state a cause of action for fraud against Defendant.  As such, the Court finds that the allegations adequately support a claim for punitive damages.    

CONCLUSION AND ORDER

For the reasons stated, the Court overrules Defendant’s Demurrer to the Complaint in its entirety and denies Defendant’s Motion to Strike in its entirety. 

Further, the Court orders Defendant to file and serve an Answer to the Complaint on or before October 18, 2024. 

Further, on the Court’s own motion, the Court continues the Case Management Conference to January 27, 2025 at 8:30 A.M. in Department 207.  All parties shall comply with California Rules of Court, rules 3.722, et seq., regarding Initial and Further Case Management Conferences.  In particular, all parties shall adhere to the duty to meet and confer (Rule 3.724) and to the requirement to prepare and file Case Management Statements (Rule 3.725). 

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

DATED:  September 26, 2024                                               ___________________________

                                                                                          Michael E. Whitaker

                                                                                          Judge of the Superior Court