I. BACKGROUND & PROCEDURAL HISTORY 

On February 1, 2024, Goodson Real Estate Co. (“GRE”) and HIMR Normandie JV, LLC (“HIMR”) (collectively, “Cross-Complainants”) filed a First Amended Cross-Complaint (“FACC”) against Express Remodeling & Plumbing Inc. (“Express”), Jacob Mullem (“Mullem”), The North River Insurance Company, Hudson Insurance Company, Hajoca Corporation (“Hajoca”) and Roes 1 to 10 (collectively, “Cross-Defendants”) setting forth eight causes of action for (1) breach of contract, (2) negligence, (3) fraud, (4) conversion, (5) contractors license bond, (6) violation of B&P §17200, et. seq., (7) tortious interference, and (8) accounting. 

On March 4, 2024, Hajoca filed a demurrer and motion to strike against Cross-Complainants’ FACC. On April 14, 2024, Mullem filed a notice of stay of proceedings. On May 1, 2024, Cross-Complainants filed a non-substantive opposition. On May 2, 2024, Hajoca filed an objection to the notice of stay of proceedings. 

On March 14, 2024, the Hon. Jill Feeney heard Hajoca’s motions and found that the proceedings in the case were stayed only as to Mullem. As such, Hajoca’s demurrer and motion to strike would proceed, and the motions continued to June 11, 2024 in order to allow Cross-Complainants to file a substantive opposition no later than May 29, 2024, and Hajoca’s reply due no later than June 4, 2024. (Min. Order, May 14, 2024.) The parties timely filed the briefs in accordance with the briefing schedule. 

On June 11, 2024, Judge Feeney (1) sustained Hajoca’s demurrer to the third and sixth causes of action for fraud and violation of B&P §17200 with leave to amend, (2) sustained the demurrer to the eighth cause of action for accounting without leave to amend, and (3) granted the motion to strike punitive damages with leave to amend. (Min. Order, June 11, 2024.) 

On July 1, 2024, Cross-Complainants filed their SACC against Cross-Defendants, setting forth seven causes of action for (1) breach of contract, (2) negligence, (3) fraud, (4) conversion, (6) contractors license board, (6) violation of B&P §17200, and (7) tortious interference. 

On July 30, 2024, Hajoca filed a demurrer against the third and sixth causes of action of the SACC and a motion to strike punitive damages pertaining to the third cause of action. 

On October 1, 2024, Cross-Complainants filed oppositions to the motions. 

On October 7, 2024, Hajoca filed its replies. 

II. PROCEDURAL REQUIREMENT 

Before filing a demurrer and/or motion to strike, the moving party is required to meet and confer with the party who filed the pleading demurred to for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer. (CCP §§ 430.41(a); 435.5(a).)¿¿¿¿¿ 

The Court finds Hajoca fulfilled the meet and confer requirement prior to filing the demurrer and motion to strike. 

III. DEMURRER 

Hajoca argues that the fraud-based allegations do not present the required degree of specificity to support a fraud claim against it, because the SACC does not allege how, when, and by whom the invoices were fabricated and mailed out, and fails to disclose the identity and authority of the individual who issued the invoices. Hajoca contends the SACC does not apprise Hajoca as to which invoices are in dispute, nor does it allege in what way the dates of delivery or shipments were fabricated. Hajoca avers that the SACC alleges generic information. For similar reasons, Hajoca argues that the UCL claim contains generic reference to violation of 18 USC §§ 1341 and 1343, and that its right to record a lien is protected by the litigation privilege. 

In opposition, Cross-Complainants argue they addressed the allegation issues the court previously pointed at the last demurrer, and that aside from those issues, the court found the causes of action sufficiently pled. 

In reply, Hajoca argues the opposition does not substantively address the issues raised, and merely defers to the June 11, 2024 ruling. Hajoca contends the court’s prior ruling did not find that the causes of action were sufficiently pled, but rather sustained the demurrer with leave to amend to allow Cross-Complainants to supplement their fraud-based allegations and the unfair business practice allegations. 

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.) When considering demurrers, courts read the allegations liberally and in context. In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.)¿ 

“A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed. (Code Civ. Proc., §§ 430.30, 430.70.) At the pleading stage, a plaintiff need only allege ultimate facts sufficient to apprise the defendant of the factual basis for the claim against him. (Semole v. Sansoucie (1972) 28 Cal. App. 3d 714, 721.) A “demurrer does not, however, admit contentions, deductions or conclusions of fact or law alleged in the pleading, or the construction of instruments pleaded, or facts impossible in law.” (S. Shore Land Co. v. Petersen (1964) 226 Cal.App.2d 725, 732 (internal citations omitted).) 

The SACC alleges in pertinent part the following. Cross-Complainant HIMR is the owner of real property located at 1124-1138 S. Normandie Ave., Los Angeles, CA 90006 ("Property"), and cross-complainant GRE is the developer of said Property. (SACC ¶¶ 13-14.) On December 13, 2021, GRE entered into a Subcontract Agreement with Cross-Defendants Express and Mullem. (Id. ¶ 16.) GRE paid Express more than $194,000 for work on the Property. (Id. ¶ 19.) Express and Mullem failed to commence work in a timely manner, misrepresented the work being done, and that the work done was performed in an overtly negligent manner. (Id. ¶¶ 21-23.) 

Hajoca furnished materials to Express and Mullem and opened an unauthorized charge account to GRE. (SACC ¶¶ 30-31.) Hajoca is alleged to be, at best, grossly negligent for providing materials to Express/Mullem without Cross-Complainants authorization and then billing GRE for the materials. (Id. ¶ 32.) Upon GRE being made aware of the charges to GRE, GRE reached out to Hajoca, specifically to general manager Shad Peck and managing agent Jessica Ortiz requesting the charges be removed and charged to Express/Mullem. (Id. ¶ 34.) Hajoca issued a Preliminary Notice in the amount of $150,000 for the materials, and fabricated/doctored invoices, delivery dates, and shipment dates between December 2022 through March 2023, and fabricated a statement of account on April 13, 2023 which was submitted to Cross-Complainants. (Id. ¶ 36.) Cross-Complainants allege they were “forced to rely on the material representations made by Hajoca, by way of being forced to purchase and obtain a bond in the amount of $159,435.” (Id. ¶ 37.) Hajoca, Express, and Mullem are co-conspirators attempting to defraud Cross-Complainants. (Id. ¶ 38.) 

“‘In general, to establish a cause of action for fraud or deceit plaintiff must prove that a material representation was made; that it was false; that defendants knew it to be untrue or did not have sufficient knowledge to warrant a belief that it was true; that it was made with an intent to induce plaintiff to act in reliance thereon; that plaintiff reasonably believed it to be true; that it was relied on by plaintiff; and that plaintiff suffered damage thereby.’” (Nathanson v. Murphy (1955) 132 Cal. App. 2d 363, 367.) 

The Court finds that Cross-Complainants have not pled with particularity a fraud claim against Hajoca. (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216 [Fraud actions are subject to strict requirements of particularity in pleading.]; see also Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184 [Fraud must be pleaded with specificity rather than with general and conclusory allegations.].) Further, reading the SACC as a whole and assuming the truth of the allegations for the purposes of this demurrer, it is clear that GRE was aware that the charges invoiced to GRE were at issue. Cross-Complainants attempt to remedy the issue of justifiable reliance by adding the allegation that they were forced to buy a bond due to the fraudulent invoices. However, the purchase of a bond was a side effect or consequence of the alleged fraudulent invoices. The allegation is not that Hajoca attempted to defraud Cross-Complainants with the intent that Cross-Complainants purchase a bond, but that Hajoca attempted to defraud Cross-Complainants for payment on unauthorized invoices. A plain reading of the allegations demonstrates that Cross-Complainants did not actually believe the invoices and statement of accounts to be true. Conclusory assertions of reliance on misrepresentations are insufficient to satisfy the requirement of specific pleading of fraud, and instead facts must be alleged that would indicate actual reliance on the misrepresentations. (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184.) The fact that GRE contacted Hajoca seeking the charges to be removed demonstrates no belief in the truth of the invoices, and therefore Cross-Complainants could not have reasonably relied upon it. 

The demurer to the third cause of action is therefore SUSTAINED. Because this is the second time this has been sustained, it will be without leave to amend. 

The SACC alleges mail fraud and wire fraud pursuant to 18 USC §§1341 [frauds and swindles] and 1343 [Fraud by wire, radio, or television] because Hajoca allegedly sent numerous fabricated invoices and delivery dates to Cross-Complainants by mail and e-mail.  

The UCL defines “unfair competition” as “any unlawful, unfair or fraudulent business act or practice.” (Cal. Bus. and Prof. Code § 17200.) “By prohibiting unlawful business practices, ‘ “section 17200 ‘borrows’ violations of other laws and treats them as unlawful practices” that the unfair competition law makes independently actionable.’ ” [Citation.] (Lee v. Luxottica Retail N. Am., Inc. (2021) 65 Cal. App. 5th 793, 799.)  However, “While the scope of conduct covered by the UCL is broad, its remedies are limited. [Citation]. A UCL action is equitable in nature; damages cannot be recovered. [Citation].” (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal. 4th 1134, 1144.)  

Here, Cross-Complainants do not seek equitable relief against Hajoca in the form of either restitution or an injunction, but rather damages. The SACC does not plead, and nor do Cross-Complainants make any contention, that money or property was ever obtained by Hajoca from Cross-Complainants, such that there exists an equitable remedy. "[T]he Supreme Court held that nonrestitutionary disgorgement of profits—that is, profits that are neither money a defendant took from the plaintiff nor funds in which the plaintiff has an ownership interest—is not an authorized remedy under the UCL in an individual action.” (Lee, supra, 65 Cal. App. 5th at pp. 800–801, citing to Korea Supply, supra, 29 Cal.4th at pp. 1140, 1144-1148.) The allegations make it clear that Cross-Complainants had disputed the propriety of the charges invoiced to GRE, but that no money was paid by Cross-Complainants to Hajoca. Because the allegations demonstrate that Cross-Complainants’ claims against Hajoca are not restitutionary in nature, there is no available remedy to Cross-Complainants under the UCL for there to be a cause of action under this statute. (See also Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 179 [“Prevailing plaintiffs [under the UCL] are generally limited to injunctive relief and restitution.”]; see also Clark v. Superior Court (2010) 50 Cal.4th 605, 610 [Under the Business & Professions Code, a private plaintiff’s remedies are generally limited to injunctive relief and restitution.].) 

The demurrer to the sixth cause of action is SUSTAINED without leave to amend. 

IV. MOTION TO STRIKE 

Hajoca moves to strike punitive damages in paragraph 76 of the third cause of action, and the prayer relief for punitive damages as it relates to the third cause of action. Because the Court has already sustained Hajoca’s demurrer to the third cause of action for fraud without leave to amend, the motion to strike is therefore rendered moot.