Judge: Michael Shultz, Case: 22CMCV00412, Date: 2023-08-29 Tentative Ruling
Case Number: 22CMCV00412 Hearing Date: August 29, 2023 Dept: A
22CMCV00412
Private Equity Funding, Inc. v. PR Logistics, LLC, et al.
[TENTATIVE] ORDER
SUSTAINING DEMURRER TO THE SECOND AMENDED COMPLAINT IN PART AND OVERRULING IN
PART, AS AGAINST DEFENDANTS, PR LOGISTICS, LLC; JULIETA COLIO; LINK LOGISTICS
SOLUTIONS, INC.; AND ROBERT REZNICK; AND JENNE LEPE
I.
BACKGROUND
The second amended complaint (“SAC”)
alleges that Defendants failed to pay for packaging and shipping supplies delivered
to Defendants totaling $60,195.54. Plaintiff alleges claims for fraud,
negligence, breach of contract, and open book account. On May 4, 2023, the
Court sustained Defendants’ demurrer to the first amended complaint with leave
to amend but overruled the demurrer to the alter ego allegations. Defendants
filed a second amended complaint on May 12, 2023.
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 the first through fourth
causes of action. Defendants contend the fraud claims are not alleged with
specificity. The fourth cause of action for fraud is duplicative of the other
fraud claims. The claim for breach of contract should be dismissed as to all
Defendants except Logistics, the only contracting party.
Plaintiff
argues that the facts are specifically and adequately alleged to place
Defendants on notice of Plaintiff’s claims. Alternatively, Plaintiff asks for
leave to amend.
In
reply, Defendants argue that this is Plaintiff’s third attempt to allege her
claims all of which remain defective. The Court should not permit leave to
amend.
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 OVERRULED.
A claim for fraud
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.)
A claim for negligent
misrepresentation requires the same elements except that the second element
requires that the misrepresentation is made without reasonable grounds 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 specificity requirement serves
two purposes: “to apprise the defendant of the specific grounds for the charge
and enable the court to determine whether there is any basis for the cause of
action.”(Daniels v. Select Portfolio Servicing, Inc. (2016) 246 Cal.App.4th 1150, 1167.) 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 SAC adequately alleges this claim with
specificity: at a time when Defendants stopped making cash payments for
merchandise, stalled payments, and after a check was returned for insufficient
funds, Defendant Colio had an April 2022 telephone conversation with Plaintiff wherein
Colio, with knowledge and affirmation of Reznik and Lepe, all of whom held
themselves out as officers of the corporation, represented, assured, and
guaranteed PR’s financial solvency and ability to cover the orders placed
during the telephone conversation. (SAC, ¶¶ 21, 24.) The allegations support the
remaining elements of the claim, including Plaintiff’s reasonable but
detrimental reliance and resulting damage. (SAC ¶¶ 45-51.)
The
second cause of action for fraud relies on the same alleged misrepresentations
but alleges that they were made with knowledge of the statements’ falsity since
Colio, Reznik and Lepe knew that the company was in financial trouble and would
not be making payments. (SAC ¶ 57.) The individual Defendants allegedly made
and affirmed these misrepresentations to induce Plaintiff to rely on and
continue to fulfill Defendants’ orders. (SAC ¶ 58.) These misrepresentations
and assurances occurred again on August 11, 2022, when Colio made the
misrepresentation with knowledge and assurance of Reznik and Lepe. (SAC ¶ 31.)
Defendants
argue that Plaintiff did not identify the person to whom they spoke when making
these alleged misrepresentations. However, the SAC alleges that Plaintiff
placed the orders at issue after speaking with Colio in April of 2022 during a
telephone conversation. (SAC ¶ 24-25.) Plaintiff amended the complaint to
include the invoices that were generated after the conversations purportedly
took place and identify the salesperson as “Esmeralda Alvarez.” (SAC, .pdf pp.
33, 35, 39. 44.) It is reasonable to infer that Defendants made these
representations to the salesperson.
Defendants
also argue that Plaintiff did not allege that any Defendant other than Colio
made the alleged misrepresentations. However, Plaintiff alleges that all defendants
were acting as agents of the other. (SAC ¶ 10.) Therefore, the allegations that
Colio made the misrepresentation with knowledge and assurance of the other
Defendants are relevant to support ratification of Colio’s alleged misconduct.
(Civ. Code, §
2307; City of
Brentwood v. Department of Finance (2020) 54 Cal.App.5th 418, 436 ["the
act may be rendered valid and binding on the principal, as of the time the
unauthorized act was done, if the principal ratifies and thus gives effect to
it”].)
B.
Demurrer to the fourth cause of action
for fraud is SUSTAINED.
This
claim is based on the same facts alleged in the first cause of action for negligent
misrepresentation. California recognizes
four forms of deceit: “intentional misrepresentation, negligent misrepresentation,
concealment, and failure to perform a promise." (Finch Aerospace
Corp. v. City of San Diego (2017) 8 Cal.App.5th 1248, 1252; Civ. Code, §
1710.)
The
first and fourth causes of action allege the lack of reasonable grounds for
believing the statements to be true, which is negligent misrepresentation. Civ. Code, §
1710 [“assertion, as a fact, of
that which is not true, by one who has no reasonable ground for believing it to
be true.”]. (SAC ¶ 47, 74.) The fourth cause of action is duplicative of the
first cause of action.
(Award
Metals, Inc. v. Superior Court (1991) 228 Cal.App.3d 1128, 1135 [279
Cal.Rptr. 459].) [A cause of action alleging the same facts as a
separate cause 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”].)
C.
Demurrer to the third
cause of action for breach of contract is OVERRULED.
Previously,
the Court determined that the contract claim was uncertain as to the
individuals, Reznick and Lepe. The claim
for breach of contract is based on six unpaid invoices evidencing the parties’
agreement and are adequately alleged as between Plaintiff and Colio/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
SAC more specifically alleges Reznick’s and Lepe’s involvement, their knowledge,
and assurances relating to Colio’s conduct, as previously discussed, which is
relevant to their ratification of an alleged agent’s conduct. Plaintiff also alleges
that each individual defendant acted as an alter-ego of the other defendants.
(SAC ¶ 11.) Accordingly, demurrer is OVERRULED.
V.
CONCLUSION
Based
on the foregoing, the demurrer to the first, second, and third causes of action
for negligent misrepresentation, intentional misrepresentation, and breach of
contract, respectively is OVERRULED. Demurrer to the fourth cause of action for
“fraud” is SUSTAINED without leave to amend. Defendants are ordered to answer
within 10 days.