Judge: Michael Shultz, Case: 22CMCV00412, Date: 2023-05-04 Tentative Ruling
Case Number: 22CMCV00412 Hearing Date: May 4, 2023 Dept: A
22CMCV00412
Private Equity Funding, Inc. v. PR Logistics, LLC, et al.
[TENTATIVE] ORDER SUSTAINING DEMURRER IN PART AND OVERRULING
DEMURRER IN PART.
I.
BACKGROUND
The first amended complaint
(“FAC”) alleges that Defendants failed to pay for packaging and shipping supplies
sold to Defendants totaling $42,961.54. Plaintiff alleges claims for fraud,
negligence, breach of contract, and open book account.
II.
ARGUMENTS
Defendants, PR Logistics, LLC (“Logistics”);
Link Logistics Solutions, Inc. (“Link”); and ALG Worldwide (“ALG) (collectively,
“the Corporate Defendants”) and Robert Reznik (“Reznick”); Julieta Colio (“Colio”;
and Jenny Lepe (“Lepe”) (collectively, “individual Defendants”) demur to all
causes of action. Defendants contend the fraud claims are not alleged with
specificity, and the facts do not state a basis for liability against Reznick,
Link, and ALG.
Plaintiff argues that the
corporate defendants are properly joined since they all transacted
interchangeably with Plaintiff. The facts are specifically alleged to survive
demurrer. The alter ego allegations are sufficient to state claims against
corporate and individual defendants.
In reply, Defendants contend that
individual employees’ statements do not create personal guarantees on behalf of
the corporate defendants. All defendants should be dismissed except PR Logistics,
Inc.
III.
LEGAL STANDARDS
The bases for demurrer are limited
by statute and may be sustained for reasons including failure to state facts
sufficient to state a cause of action and uncertainty. (Code Civ. Proc., § 430.10.) 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.) 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.)
IV.
DISCUSSION
A. Demurrer
to the claims for (1) negligent and (2) intentional misrepresentation and (4) fraud
is SUSTAINED as to Link, ALG, Reznick, and Lepe.
A claim for fraud requires facts to support the following
elements: (1) a mis-representation, (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.)
A claim for negligent misrepresentation requires the same elements
except for the second element, which requires that the misrepresentation is made
without reasonable ground for believing it to be true. (Ragland
v. U.S. Bank National Assn. (2012) 209 Cal.App.4th 182, 196.) As in
negligence, “the responsibility for negligent misrepresentation rests upon the
existence of a legal duty, imposed by contract, statute or otherwise, owed by a
defendant to the injured person. [Citation.] The determination of whether a
duty exists is primarily a question of law.” (Bock v.
Hansen (2014) 225 Cal.App.4th 215, 228.)
Fraud claims are subject to strict
requirements of particularity in pleading. (Id.) The particularity
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.)
The fraud
claims are alleged generally. The only specific allegation is made against
Colio, Logistic’s director, who allegedly provided assurance and guarantee of Logistic’s
financial solvency and ability to cover orders placed, and that the corporate
defendants would make prompt and timely payments in the future. (FAC, ¶ 24.)
Otherwise, the FAC refers to all Defendants and their alleged statements
collectively and without specificity.
The fourth
cause of action for fraud is based on the same facts alleged in the first and
second causes of action and are duplicative. (Award Metals, Inc. v. Superior Court (1991) 228
Cal.App.3d 1128, 1135 [stating identical allegations in two causes of action “is merely duplicative pleading which adds nothing to the
complaint by way of fact or theory. For that reason, the demurrer should have
been sustained”].)
B.
Demurrer to the alter ego
allegations is OVERRULED.
To recover on an
alter ego theory, a plaintiff must allege facts to show a unity of interest and
ownership and an unjust result if the corporation is treated as the sole
actor. (Leek
v. Cooper (2011) 194 Cal.App.4th 399, 415.) Conclusory
allegations are permitted and entitles plaintiff “to seek by discovery the
facts by which that allegation might be proved.” (Los
Angeles Cemetery Asso. v. Superior Court of Los Angeles County (1968)
268 Cal.App.2d 492, 494 [74 Cal.Rptr. 97].)
Plaintiff identifies the circumstances under which the
individuals are alter egos of the corporate defendants, namely, unitary
control, commingling funds and assets, using assets for personal benefit,
disregarding legal formalties, and inadequate capitalization among other allegations.
(FAC, ¶ 11-15.) Plaintiff alleges that adherence to the fiction of separateness
would sanction a fraud or promote injustice. (FAC ¶ 14.)
C.
Demurrer to the third cause of
action for breach of contract is SUSTAINED.
The claim for breach of contract is based on
the six unpaid invoices evidencing the parties’ agreement and are adequately
alleged as between Plaintiff and Coolio/Logistics. (FAC Ex. A). The elements of
a claim for breach of contract are (1) the existence of a valid and existing
contract between the parties, (2) Plaintiff’s performance or excuse for
non-performance, (3) Defendant’s breach; and (4) resulting damage. (Richman v. Hartley (2014)
224 Cal.App.4th 1182, 1186.) A contract
can be alleged either verbatim or according to its legal intendment and effect.
An oral contract may be pleaded generally as to its effect, “because it is
rarely possible to allege the exact words.” (Scolinos
v. Kolts (1995) 37 Cal.App.4th 635, 640.) To plead a contract by its
legal effect, plaintiff must
“allege the substance of its relevant terms.” (Heritage Pacific Financial, LLC v. Monroy (2013) 215 Cal.App.4th 972, 993.)
The other
entity Defendants are alleged to be liable as alter egos. The claim is
uncertain as to the individuals, Reznick and Lepe.
D.
Demurrer to the fifth cause of
action for open book account is SUSTAINED.
This claim is
based on the same alleged facts that Defendants failed to pay for the six
invoices. The elements of an open book account cause of action are: “1. That
[plaintiff] and [defendant] had financial transactions …; [¶] 2. That
[plaintiff] … kept [an] account of the debits and credits involved in the
transactions; [¶] 3. That [defendant] owes [plaintiff] money on the account;
and [¶] 4. The amount of money that [defendant] owes [plaintiff]. (State Comp. Ins. Fund v. ReadyLink Healthcare, Inc. (2020)
50 Cal.App.5th 422, 449.)
This claim is
adequately alleged as to Colio and Logistics, and against the other corporate
defendants as alter egos. The claim is uncertain as there are no actionable
facts alleged against the individuals, Reznick and Lepe.
V. CONCLUSION
If there is a reasonable
possibility that the defect in a complaint can be cured by amendment, it is an
abuse of discretion to sustain a demurrer without leave to amend.(Association of Community Organizations for Reform Now v.
Department of Industrial Relations (1995) 41 Cal.App.4th 298, 302.) For the foregoing reasons, demurrer is SUSTAINED with 10 days
leave to amend as to all causes of action and OVERRULED as to the alter ego
theory of liability.