Judge: Michael Shultz, Case: 22CMCV00134, Date: 2022-08-23 Tentative Ruling
Case Number: 22CMCV00134 Hearing Date: August 23, 2022 Dept: A
22CMCV00134
STRINGKING, INC. et al v. CALIFORNIA AIR CONDITIONING SYSTEMS, INC.
[TENTATIVE] ORDER
I.
BACKGROUND
The complaint alleges that
Plaintiff Stringking, Inc. retained co-Plaintiff, Herns Construction, Inc.
(“Herns”) to build an equipment manufacturing facility. Herns hired
sub-contractor, California Air Conditioning Systems, Inc. (“CACS” or Defendant)
to perform work for $600,000. Plaintiffs allege that Defendant reneged on the
agreement, sought exorbitant rates for labor, and increased the price for the
same scope of work. Plaintiffs allege claims for conversion, intentional and
negligent misrepresentation, promissory fraud, negligence, and unfair
competition.
II.
ARGUMENTS
A.
Demurrer and Motion to Strike
filed May 13, 2022
Defendant demurs to the entire
complaint for failure to state causes of action and for uncertainty. According
to Defendant, the conversion claim fails because the air conditioning units
that Defendant allegedly converted never belonged to Plaintiffs. The fraud
claims are not alleged with required specificity. Fraud claims against
corporations require heightened pleading. Plaintiffs failed to identify the
specific invoices that were purportedly fraudulent. Plaintiffs never paid for
invoices issued by Defendant, therefore, there was no detrimental reliance.
The negligence claim is vague
since Plaintiffs did not describe the defects at issue that caused property
damage. The economic loss rule precludes recovery of damages where Plaintiffs
did not sustain property or personal damage because of the alleged construction
defect.
The cause of action for unfair
competition is based on the underlying claims, all of which fail. The complaint
is confusing because both Plaintiffs are “lumped together.” The complaint
alleges that CACS marketed their services to both Plaintiffs, however, only
Herns retained CACS, therefore, Plaintiff Stringking could not have been
affected by purported deceptive marketing by CACS.
Defendant separately moves to
strike the prayer for punitive damages since Plaintiffs have not alleged
predicate facts that arise to malice, fraud, or oppression, required to support
the claim. The claim for unfair competition does not support a claim for
punitive damages.
B.
Opposition due August 10, 2022 filed August 15, 2022 (nine court
days before the hearing.) Code Civ. Proc., 1005(b).
Plaintiffs argue that all causes
of action are adequately pleaded based on the facts alleged. If the court finds
that the complaint is defective, Plaintiffs ask for leave to amend. [Plaintiffs
did not file an opposition to the motion to strike].
C.
Reply filed August 16, 2022
Defendant
reiterates that the joinder of Plaintiffs to each cause of action renders the
complaint uncertain. Stringking is alleged to be a lessor who hired Herns, who
hired Defendant as a sub-contractor. Plaintiffs are separate entities with
distinct positions on the project.
III.
LEGAL
STANDARDS
A demurrer tests the
sufficiency of a complaint as a matter of law and raises only questions of law.
Schmidt v. Foundation Health (1995) 35
Cal.App.4th 1702, 1706. In testing the sufficiency of the complaint, the court
must assume the truth of (1) the properly pleaded factual allegations; (2)
facts that can be reasonably inferred from those expressly pleaded; and (3)
judicially noticed matters. Blank v. Kirwan (1985) 39 Cal.3d 311, 318.
The Court may not
consider contentions, deductions, or conclusions of fact or law. Moore v. Conliffe (1994) 7 Cal.4th 634, 638.
Because a demurrer tests the legal sufficiency of a complaint, the plaintiff
must show that the complaint alleges facts sufficient to establish every
element of each cause of action. Rakestraw v. California Physicians Service (2000) 81 Cal.App.4th 39, 43. Where the complaint fails to state facts
sufficient to constitute a cause of action, courts should sustain the demurrer.
Code Civ. Proc., § 430.10(e); Zelig v. County of Los Angeles (2002) 27 Cal.4th
1112, 1126.
Sufficient facts are
the essential facts of the case "with reasonable precision and with
particularity sufficiently specific to acquaint the defendant with the nature,
source, and extent of his cause of action.” Gressley v. Williams (1961) 193
Cal.App.2d 636, 643-644. Whether the Plaintiff will be able to prove the
pleaded facts is irrelevant. Stevens v. Superior Court (1986) 180 Cal.App.3d
605, 609–610.
A demurrer may also be
sustained if a complaint is “uncertain.” Uncertainty exists where a complaint’s
factual allegations are so confusing, they do not sufficiently apprise a
defendant of the issues it is being asked to meet. Williams v. Beechnut Nutrition Corp. (1986) 185 Cal.App.3d 135, 139, fn. 2; Code Civ. Proc., § 430.10(f).
A pleading is required to assert general
allegations of ultimate fact. Evidentiary facts are not required. Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal. 4th 26, 47; Lim v. The.TV Corp. Internat. (2002) 99 Cal.
App. 4th 684, 690. However, unlike federal courts, California state courts are
not a notice pleading jurisdiction, and notice alone is not a sufficient basis
for any pleading. California
is a fact pleading jurisdiction. Merely putting an opposing party on notice is
not sufficient. Bach v.
County of Butte
(1983) 147 Cal.App.3d 554, 561; see Diodes,
Inc. v. Franzen
(1968) 260 Cal.App.2d 244, 250.
IV.
DISCUSSION
A.
Demurrer to the first cause of action for conversion is SUSTAINED
as to Plaintiff Herns’ interests in the air-conditioning units.
Defendant met and conferred with
Plaintiff by telephone prior to filing the demurrer and motion to strike. The
parties were unable to resolve their disputes. Declaration of John McGowan
filed with the Motion to Strike, .pdf page 8. Code Civ. Proc., § 430.41 and §
435.5.
To support a claim for conversion,
Plaintiffs must allege facts showing an ownership interest or a right to
possession of property at the time of conversion, a wrongful act or
dispossession of Plaintiffs’ property rights and resulting damages. Lee v. Hanley (2015) 61
Cal.4th 1225, 1240. This claim is adequately alleged with respect to Plaintiff
StringKing. StringKing alleges that Defendant agreed to accept funds directly
from StringKing totaling $181,912.50 via wire transfer for the specific
purchase of the air conditioning units needed for the project. Complaint ¶
13. Defendant allegedly failed and
refused to deliver the units despite StringKing’s demands. Id.
Defendant denies that the units
ever “belonged” to either Plaintiff. However, this is an issue of fact that
cannot be determined at this stage. The court accepts all allegations as true
for purposes of a demurrer. StringKing alleged the right to an ownership
interest or a right to possession since it wired funds to Defendant for the
purchase of the units. Complaint ¶ 13. The case on which Defendant relies
affirms that Plaintiffs must establish an actual interference with his
ownership or right of possession. Moore v. Regents of University of California (1990) 51 Cal.3d 120, 136. This is supported by Plaintiff’s
purchase of and Defendant’s refusal to deliver the units, thus interfering with
Plaintiff’s ownership rights.
To the extent StringKing alleges
that Defendant converted the funds meant for purchase of the air conditioning
units, money can be the subject of an action for conversion if a specific sum
capable of identification is involved. Farmers Ins. Exchange v. Zerin
(1997) 53 Cal.App.4th 445, 452. StringKing alleges the specific sum sent to
Defendant. Complaint ¶ 13.
However, the allegations do not
clearly allege a basis for Plaintiff Herns’ right of ownership or possession of
the AC units that StringKing allegedly bought alone. On that basis, the claim
is uncertain with respect to Herns’ role in the transaction.
B.
Demurrer is SUSTAINED with respect to the second cause of action
for international misrepresentation, third cause of action for negligent
misrepresentation and fourth cause of action for false promise.
A fraud
claim requires facts to support the following elements: (1) a
misrepresentation, (2) made with knowledge of its falsity, (3) Defendant
intended to defraud Plaintiff, i.e., induce Plaintiff’s reliance, (4) Plaintiff
justifiably relied on the misrepresentation, (5) causing damage. Nagy v. Nagy (1989) 210 Cal.App.3d 1262, 1268. Fraud
claims are subject to strict requirements of particularity in pleading. Id.
These requirements necessitate pleading facts showing “how, when, where, to
whom, and by what means the representations were tendered." Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73. The
requirement “applies not only to the alleged misrepresentation, but also to the
elements of causation and damage." Moncada v. West Coast Quartz Corp. (2013) 221 Cal.App.4th 768, 776.
Where fraud is alleged against a
corporation, the pleading standards are even greater. Plaintiff must allege
“the names of the persons who made the allegedly fraudulent representations,
their authority to speak, to whom they spoke, what they said or wrote, and when
it was said or written." Lazar
v. Superior Court (1996) 12 Cal. 4th 631, 645.
An action for promissory fraud (or false
promise) may lie where a defendant “fraudulently induces the plaintiff to enter
into a contract." Service
by Medallion, Inc. v. Clorox Co.(1996)
44 Cal.App.4th 1807, 1816. The action is one of deceit, which requires proof
that the “defendant made a misrepresentation of fact or a promise without any
intention of performing it.” Id. The same elements for intentional fraud
apply in a claim for false promise, and every element must be specifically
pleaded. Id.
The
fraud-based claims are not alleged with specificity. Plaintiffs do not allege
any specific person from CACS who agreed to accept funds from StringKing, their
authority to speak, to whom they spoke, what they said or wrote and when it was
said or written. The second cause of action concludes without specific factual
basis that invoicing for “rental equipment” was fraudulent. Plaintiffs have not
alleged facts to support Defendant’s intent to defraud, justifiable reliance
and resulting damages; all are alleged in a conclusory manner. Complaint, ¶¶
20-28. The second through fourth causes of action make the same general
allegations which do not meet the heightened requirements of pleading for
fraud-based claims. Complaint, ¶¶ 30-43.
As Defendant also observes in
demurrer, the allegations are vague and uncertain in that they do not
differentiate between each Plaintiff by specifically identifying who was
alleged defrauded and by whom.
C. Demurrer
to the fifth cause of action for negligence is SUSTAINED.
A negligence claim requires facts showing
that defendant owed plaintiff a duty of care, breach of that duty, causation, and
damages. Merrill v. Navegar, Inc. (2001) 26 Cal.4th
465, 477. Plaintiff must allege facts
supporting the contention that Defendant owed a legal duty. Jones v. Grewe (1987) 189 Cal. App. 3d 950, 954. The
absence of these allegations renders a complaint fatally defective and is
properly challenged by demurrer. Id.; Hegyes v. Unjian Enterprises, Inc. (1991) 234 Cal.App.3d 1103.
The joinder of both Plaintiffs in
this cause of action renders the complaint uncertain; it is not clear to whom
Defendant owes a duty, given the allegation that Plaintiff retained Herr, who
retained Defendant subcontractor. Plaintiffs must allege facts on which a duty
of care arises and is owed by Defendant to each Plaintiff. Jones, supra at 954.
Additionally,
Plaintiffs did not allege the damages suffered because of Defendant’s alleged breach
of duty. The complaint generally alleges that Plaintiffs “were harmed.”
Complaint, ¶ 45. Plaintiffs allege that the work that was completed was not
performed in compliance with the plans and specifications for the work and was
otherwise defective. Complaint, ¶ 12. In Aas
v. Superior Court (2000) 24 Cal.4th 627 [superseded by
statute on other grounds], homeowners brought negligence claims against the
developer, contractor, and subcontractors to recover costs of repairing alleged
construction defects. The Supreme Court held that the “economic loss rule”
barred the plaintiffs’ claims for negligence which did not allege property
damage or personal injuries. Id. at 636.
Here, the
complaint alleges that Plaintiffs suffered lost profits alone. Complaint ¶¶ 9, 13,
27. Under Aas, the negligence claim is barred by the economic loss rule.
Id. [“The difference between
price paid and value received and deviations from standards of quality that
have not caused personal or property damage, are primarily the domain of contract
and warranty law or the law of fraud, rather than of negligence.”].
D. Demurrer
to the sixth cause of action for unfair competition is SUSTAINED.
This cause of action incorporates the underlying claims
in that Defendant was negligent, converted key equipment, and made false
statements. Complaint ¶¶ 47-48. Plaintiffs also add that Defendant deceptively
marketed their services to Plaintiffs. Complaint, ¶ 8. Plaintiffs do not allege
what remedy is sought under Bus. & Prof. Code section 17200 (“Unlawful Competition Law” or “UCL”). Under California law, an unlawful business
practice can be based on violations of other laws. The UCL treats them as
unlawful practices and makes them independently actionable. Cel-Tech Communications, Inc. v. Los Angeles Celular Telephone, Co. (1999) 20 Cal.4th 163,
180. The underlying claims are not well pleaded. Therefore, this claim is
equally defective.
V.
MOTION TO STRIKE
Defendant moves to strike the
prayer for punitive damages. Complaint, 7:7. Plaintiffs did not file an
opposition. The court may, upon motion or at any time in its discretion and upon
terms it deems proper: (1) strike out any irrelevant, false, or improper matter
inserted in any pleading; or (2) strike out all or any part of the pleading not
drawn or filed in conformity with the laws of California, a court rule, or an
order of the court. Code Civ. Procedure §436 subd. (a)-(b); Stafford v. Schultz (1954) 42 Cal.2d 767, 782 [“matter in
a pleading which is not essential to the claim is surplusage; probative facts
are surplusage and may be stricken out or disregarded”].)¿
In considering a motion to strike punitive damages, the
court considers the complaint as a whole and assumes the allegations are true. Clauson
v. Superior Court (1998) 67 Cal. App. 4th 1253, 1255.
Plaintiffs must allege circumstances of oppression, fraud,
or malice as those terms are defined by statute. Grieves
v. Superior Court (1984) 157 Cal. App. 3d 159, 166. The predicate
acts that will support a claim for punitive damages must be intended to cause
injury or must constitute “malicious conduct,” defined as “despicable conduct”
carried on by Defendant with a willful and conscious disregard of the rights of
others. Civ.
Code, §3294 subd. (a). Oppressive conduct is defined as
“despicable conduct” that subjects a person to cruel and unjust hardship in
conscious disregard of a person’s rights. Civ. Code, §3294 subd. (c).
Plaintiffs
have not alleged facts sufficient to support the fraud claims or any facts or
circumstances of conduct constituting malice or oppression.
VI.
CONCLUSION
Based
on the foregoing, as to Plaintiff Herns, Defendant’s demurrer is SUSTAINED as to
all six causes of action. As to Plaintiff StringKing, Inc., Defendant’s
demurrer is SUSTAINED as to causes of action two through six and overruled as
to causes of action one [conversion]. The
motion to strike the prayer for punitive damages is GRANTED. Leave to amend is
proper where Plaintiffs have not had a fair opportunity to amend, and the
defect is capable of being cured.” Colvig v. RKO Gen. (1965) 232 Cal. App. 2d 56, 69-70.
Plaintiffs are given 10 days leave to file an amended pleading. .” Cal. Rules of Court, Rule 3.1320., subd. (g).