Judge: Michael Shultz, Case: 24STCV09515, Date: 2025-02-04 Tentative Ruling

Case Number: 24STCV09515    Hearing Date: February 4, 2025    Dept: 40

24STCV09515 Sonya Dove, Inc., et al v. Junio and Taylor, APC, Inc.

Tuesday, February 4, 2025

 

[TENTATIVE] ORDER OVERRULING DEMURRER TO PLAINTIFF’S FIRST AMENDED COMPLAINT

[TENTATIVE] ORDER DENYING THE MOTION TO STRIKE

 

                                                  I.          BACKGROUND

       The first amended complaint alleges that Defendants were negligent in managing Plaintiff’s business finances. Plaintiff alleges claims for professional negligence, fraud, breach of contract, and breach of fiduciary duty.

                                                   II.         ARGUMENTS

       Defendants, Junio and Taylor, APC and James E. Junio (“Defendants”) demur to all four causes of action. Defendants argue that only the negligence claim should go forward; the other claims are re-labeled negligence claims and are duplicative of the negligence claim which asserts a single primary right.  Defendants do not owe a fiduciary duty and the alleged misrepresentation did not cause damage. The fraud claim is not alleged with specificity. Junio is not personally liable. Plaintiffs have not alleged a basis for liability against Junio.

       In opposition, Plaintiffs argue that all claims are adequately pled and while there is no inherent fiduciary relationship, there is a confidential relationship between Plaintiffs and their accountants. Each claim is based on a distinct legal wrong.

       In reply, Defendants argue that all claims other than negligence are superfluous and are pled so that Plaintiffs can recover punitive damages.

                                        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 complaint’s sufficiency, the court must assume the truth of the properly pleaded factual allegations as well as facts that can be reasonably inferred from those expressly pleaded facts. The court may also consider matters properly subject to judicial notice. (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.) Plaintiff is required to allege 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 that is 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.)

                                                   IV.        DISCUSSION

       As Defendants concede that only the negligence claim should proceed, the court addresses the remaining causes of action and arguments at issue. (Dem. 9:4-5.)

A.      Primary right

       The invasion of one primary right gives rise to a single cause of action. (Slater v. Blackwood (1975) 15 Cal.3d 791, 795.) A cause of action consists of “(1) a primary right possessed by the plaintiff and a corresponding primary duty imposed upon the defendant, and (2) a delict or wrong committed by the defendant which constitutes a breach of such primary right and duty." (Skrbina v. Fleming Companies (1996) 45 Cal.App.4th 1353, 1364.)

B.      Breach of fiduciary duty

       This claim is not duplicative of the negligence claim because a fiduciary relationship requires a higher standard of care beyond negligence because of the existence of a confidential relationship. It is defined as "any relation existing between parties to a transaction wherein one of the parties is in duty bound to act with the utmost good faith for the benefit of the other party. Such a relation ordinarily arises where a confidence is reposed by one person in the integrity of another, and in such a relation the party in whom the confidence is reposed, if he voluntarily accepts or assumes to accept the confidence, can take no advantage from his acts relating to the interest of the other party without the latter's knowledge or consent...." (Wolf v. Superior Court (2003) 107 Cal.App.4th 25, 29.) It is synonymous with a “confidential relation” and “precludes the idea of profit or advantage resulting from the dealings of the parties and the person in whom the confidence is reposed." (Wolf v. at 30.). Wolf expressly observed that accountants like lawyers, owe a fiduciary duty to their clients. (Wolf at 40.)

       This claim is not duplicative of the negligence claim because as Skirbina observes, a cause of action is “based on the injury to the plaintiff.” (Skrbina at 1364; Crowley v. Katleman (1994) 8 Cal.4th 666, 682 [ "The primary right must also be distinguished from the remedy sought: ‘The violation of one primary right constitutes a single cause of action, though it may entitle the injured party to many forms of relief, and the relief is not to be confounded with the cause of action, one not being determinative of the other.”].)

       While the claims are based on the same conduct, Defendant has not shown that the remedy available to Plaintiff is the same as the negligence claim.  “A claimant pursuing a cause of action for breach of fiduciary duties ‘ha[s] the right to elect the kind of relief they seek.’” (Center for Healthcare Education and Research, Inc. v. International Congress for Joint Reconstruction, Inc. (2020) 57 Cal.App.5th 1108, 1125, citing and quoting Hicks v. Clayton (1977) 67 Cal.App.3d 251, 265.) The available relief includes damages or any of a “ ‘variety of equitable remedies,’ ” including disgorgement of profits. (Id., quoting Meister v. Mensinger (2014) 230 Cal.App.4th 381, 396; see Hicks, at pp. 264-265; , [“The principal has a cause of action either for a breach of contract or for a tort as a remedy for damage caused by the violation of any duty of loyalty on the part of an agent. He may also charge the agent with anything the agent receives as the result of a violation of duty.”].)

       For the same reasons, Defendants have not shown how the remedy for breach of contract is the same as a claim for fraud, or negligence, or breach of fiduciary duty. The intent element of fraud makes it actionable, “irrespective of any contractual or fiduciary duty one party might owe to the other. [Citations.]” (Hensley v. McSweeny (2001) 90 Cal.App.4th 1081, 1085.)

       Finally, while Defendants argue that Plaintiffs allege the same damage arising from all causes of action, Defendants have not established that Plaintiffs must, at the pleading stage, detail the panoply of available remedies. Plaintiffs must merely allege that the misconduct caused damage.

C.      Fraud

       Defendants argue that this claim is not alleged with the required specificity. Ordinarily, fraud claims are subject to strict requirements of particularity in pleading which 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 rule is intended to apply to affirmative misrepresentations and not to concealment.  (Alfaro v. Community Housing Improvement System & Planning Assn., Inc. (2009) 171 Cal.App.4th 1356.)

       Here, Plaintiffs allege that Defendants concealed and failed to disclose information to Plaintiffs that the tax returns were filed late, that Plaintiffs were penalized for a late payment of capital gains tax, and failed to disclose that entries were made in the corporate journals showing salary payments were made but no W-2s were issued. (FAC, ¶ 67.)

D.     Liability against Mr. Junio

       Plaintiffs allege that Mr. Junio, an individual, was at all times a director, officer, and/or agent of Junio & Taylor, APC.  (FAC, ¶ 7.) To maintain a tort claim against a director in his or her personal capacity, a plaintiff must first show that the director specifically authorized, directed or participated in the allegedly tortious conduct. (Frances T. v. Village Green Owners Assn. (1986) 42 Cal.3d 490, 508.)

        Plaintiff alleges that each Defendant was the agent of the remaining defendants, and that each defendant “ratified and/or authorized the wrongful acts of each of the Defendants.” (FAC, ¶ 9.) Liability is adequately alleged against  Mr. Junio.

E.      Motion to Strike

        Defendants move to strike the claim for punitive damages and attorney’s fees as Plaintiff has not alleged facts to support recovery of each. Defendants argue that Plaintiffs’ damage calculation prohibits recovery of punitive damages.

       A plaintiff may recover on a claim for exemplary damages where the defendant is guilty of oppression, fraud, or malice. (Civ. Code, § 3294 subd. (a).) The predicate acts to support the claim must be intended to cause injury or must constitute “malicious” or “oppressive” conduct as defined by statute. “Malice” is defined as “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.” (Civ. Code, § 3294 subd. (c)(1); College Hospital Inc. v. Superior Court (1994) 8 Cal.4th 704, 725 ["malice involves awareness of dangerous consequences and a willful and deliberate failure to avoid them"].) "Oppression" is defined as “despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person's rights.” (Civ. Code, § 3294 subd. (a) subd. (c)(2).)

       The fraud in the concealment claim adequately serves as predicate facts to support the claim for punitive damages from which a trier of fact could characterize as “despicable” and carried on with a willful and conscious disregard of Plaintiffs’ rights.

       Defendants argue that punitive damages are not justified where Plaintiffs assert actual damages totaling $49,956.00 which is not “substantial.” Whether the evidence warrants recovery of punitive damages at trial is a question for the trier of fact.

       Finally, it is not an abuse of discretion to refuse to strike a claim for attorney fees where Plaintiff has not had a full opportunity to determine the basis for such fees. (Camenisch v. Superior Court (1996) 44 Cal.App.4th 1689, 1699. Yassin v. Solis (2010) 184 Cal.App.4th 524, 533) ["There is no requirement that a party plead that it is seeking attorney fees, and there is no requirement that the ground for a fee award be specified in the pleadings."].)

                                                  V.         CONCLUSION

       Based on the foregoing, demurrer to the first amended complaint is OVERRULED. The motion to strike is DENIED. Defendants are ordered to file an answer within 30 days.