Judge Michelle Williams Court, Case 22STCV14118 2022-08-05 Tentative Ruling

Judge: Michelle Williams Court, Case: 22STCV14118, Date: 2022-08-05 Tentative Ruling

Case Number: 22STCV14118 Hearing Date: August 5, 2022 Dept: 74

22STCV14118 SUDHA RAI vs SILICON BEACH TESTING LABS

Defendants Silicon Beach Testing Labs, LLC, Bahaeddin Hassan, and Brian Franco’s Demurrer to Complaint and Motion to Strike Re: Complaint

TENTATIVE RULING: The demurrer is OVERRULED as to the first cause of action for breach of contract and SUSTAINED with leave to amend as to the second cause of action. The Motion to Strike Complaint is MOOT. Plaintiff is granted 20 days leave to amend.

Background

On April 28, 2022, Plaintiff Sudha Rai filed this action against Defendants Silicon Beach Testing Labs, LLC, Bahaeddin Hassan, and Brian Franco asserting causes of action for breach of contract and breach of the implied covenant of good faith and fair dealing. The complaint alleges Plaintiff and Defendants entered into a purchase and sale agreement whereby Defendants would pay Plaintiff $805,000.00 for all of Plaintiff’s equity interest in Silicon Beach Testing Labs, LLC. The Agreement required four scheduled payments. Defendants allegedly made the first two payments, did not pay the third, and the fourth payment is not yet due.

Demurrer and Motion to Strike

On July 7, 2022, Defendants Silicon Beach Testing Labs, LLC, Bahaeddin Hassan, and Brian Franco filed the instant demurrer and motion to strike. Defendants demur to the first cause of action for breach of contract based upon uncertainty and to the second cause of action arguing it is legally untenable and duplicative.

Defendants also move the strike the second cause of action in its entirety on the same grounds.

Opposition

In opposition, Plaintiff argues the complaint adequately states both causes of action and the paragraph relied upon for Defendants’ uncertainty argument is merely a typographical error.

Reply

Defendants did not file a timely reply. (Code Civ. Proc. § 1005(c).)

Meet and Confer

Defendants submitted the declaration of Rami Kayyali, which satisfies the requirements of Code of Civil Procedure sections 430.41 and 435.5.

Demurrer

Standard

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 complaint need not allege evidentiary facts noting plaintiff’s proof. (C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872.) 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.)

A special demurrer to a complaint is appropriate when the grounds of the pleading are uncertain, ambiguous, or unintelligible. (Code Civ. Proc. § 430.10(f); Beresford Neighborhood Assn. v. City of San Mateo (1989) 207 Cal.App.3d 1180, 1191.) Courts typically disfavor demurrers based on uncertainty, which the court strictly construes even when the pleading is uncertain in some respects. (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 616.)

If the demurrer is sustained, plaintiff must prove the possibility of cure by amendment. (Czajkowski v. Haskell & White, LLP (2012) 208 Cal.App.4th 166, 173 (citing Grinzi v. San Diego Hospice Corp. (2004) 120 Cal.App.4th 72, 78-79).) Leave to amend must be allowed where there is a reasonable possibility of successfully stating a cause of action. (Schulz v. Neovi Data Corp. (2007) 152 Cal.App.4th 86, 92.)

Breach of Contract - First Cause of Action

To state a claim for breach of contract, a Plaintiff must allege sufficient facts to establish: (1) a contract between the parties; (2) plaintiff’s performance or excuse for nonperformance; (3) defendant’s breach; and (4) damages to plaintiff from the breach. (See e.g. Wall Street Network, Ltd. v. New York Times Co. (2008) 164 Cal.App.4th 1171, 1178.) A contract must be pled verbatim in the body of the complaint, be attached to the complaint and incorporated by reference, or be pled according to its legal effect. (Bowden v. Robinson (1977) 67 Cal.App.3d 705, 718.)

The Complaint attaches the Purchase and Sale Agreement as Exhibit A and alleges Defendants breached the Agreement by failing to make the third required payment. (Compl. ¶¶ 10-11.) Defendants argue the breach of contract cause of action is uncertain because paragraph 9 of the complaint alleges the third payment was due 18 months after the issuance of the provisional license, but the Agreement attached to the complaint indicates the payment is due 12 months after the license was issued. In opposition, Plaintiff acknowledges this typographical error and notes the remainder of the allegations are consistent with a 12-month due date. (Compl. ¶¶ 10, 15.) As argued by Plaintiff, this inconsistency does not render the complaint fatally uncertain. Moreover, “[f]acts appearing in exhibits attached to the first amended complaint also are accepted as true and are given precedence, to the extent they contradict the allegations.” (Paul v. Patton (2015) 235 Cal.App.4th 1088, 1091.) Accordingly, the contract terms govern and the typographical error noted by Defendants is insufficient to sustain a demurrer.

Defendants also contend “[c]ompounding the uncertainty, the prayer for damages fails to specify the amount due.” (Dem. at 6:13-14.) Defendants do not cite authority for the proposition that a complaint is uncertain if it does not state an amount due. “A point totally unsupported by argument and authority may be rejected by the reviewing court without discussion.” (See generally Fenton v. City of Delano (1984) 162 Cal.App.3d 400, 410. See also People v. Ham (1970) 7 Cal.App.3d 768, 783 (“Where a point is merely asserted by counsel without any argument of or authority for its proposition, it is deemed to be without foundation and requires no discussion.”) (disapproved on other grounds in People v. Compton (1971) 6 Cal.3d 55).) A specific dollar amount due is only relevant in a default judgment. (See e.g. Furia v. Helm (2003) 111 Cal.App.4th 945, 957 (“the specific dollar amount is necessary only when a default judgment is to be entered.”).)

Moreover, the omission of a specific fact is not a proper basis for a demurrer for uncertainty. (See People v. Lim (1941) 18 Cal.2d 872, 883 (“[a] special demurrer for uncertainty is not intended to reach the failure to incorporate sufficient facts in the pleading, but is directed at the uncertainty existing in the allegations actually made.”).)

The complaint adequately alleges Defendants breached the Agreement by failing to make a required payment. The demurrer to the first cause of action is OVERRULED.

Breach of Implied Covenant of Good Faith and Fair Dealing – Second Cause of Action

To assert a cause of action for breach of the implied covenant of good faith and fair dealing, the allegations must “must show that the conduct of the defendant, whether or not it also constitutes a breach of a consensual contract term, demonstrates a failure or refusal to discharge contractual responsibilities, prompted not by an honest mistake, bad judgment or negligence but rather by a conscious and deliberate act, which unfairly frustrates the agreed common purposes and disappoints the reasonable expectations of the other party thereby depriving that party of the benefits of the agreement.” (Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1395.) However, “[if] the allegations do not go beyond the statement of a mere contract breach and, relying on the same alleged acts, simply seek the same damages or other relief already claimed in a companion contract cause of action, they may be disregarded as superfluous as no additional claim is actually stated.” (Id. See also Guz v. Bechtel Nat. Inc. (2000) 24 Cal.4th 317, 352 (“But insofar as the employer's acts are directly actionable as a breach of an implied-in-fact contract term, a claim that merely realleges that breach as a violation of the covenant is superfluous.”).)

Defendants first argue because “the contract is neither an insurance contract nor special employment contract[, t]he second COA for breach of the covenant of good faith and fair dealing is untenable as matter of law” citing Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654. (Dem. at 6:15-17.) However, Defendants’ argument relates to a tort claim for breach of the implied covenant, not contract claims. (See Foley, supra, 47 Cal.3d 683 (“The covenant of good faith and fair dealing was developed in the contract arena and is aimed at making effective the agreement's promises. Plaintiff asks that we find that the breach of the implied covenant in employment contracts also gives rise to an action seeking an award of tort damages.”); Carson v. Mercury Ins. Co. (2012) 210 Cal.App.4th 409, 429 (“It is well established a breach of the implied covenant of good faith is a breach of the contract.”).) Thus, a breach of the implied covenant of good faith and fair dealing contract claim is not limited to an insurance contract or special employment contract.

Defendants also argue the second cause of action is duplicative of the breach of contract claim. (Dem. at 6:18-23.) The Court agrees. The breach of contract cause of action alleges Defendants breached the contract by failing to make a required payment. (Compl. ¶ 15.) The second cause of action for breach of the implied covenant of good faith and fair dealing is based upon Defendants “extreme delay and unwillingness to pay money owed for the purchase,” (Compl. ¶ 20), which is the same non-payment allegation phrased differently. The only benefit Plaintiff allegedly did not receive under the Agreement is the required payment. Accordingly, “the allegations do not go beyond the statement of a mere contract breach and, rely[] on the same alleged acts, [and] simply seek the same damages or other relief already claimed in a companion contract cause of action, they [therefore] may be disregarded as superfluous as no additional claim is actually stated.” (Careau, supra, 222 Cal.App.3d at 1395.)

The demurrer to the second cause of action is SUSTAINED with leave to amend.

Motion to Strike

Defendants move to strike the entire second cause of action for breach of the implied covenant of good faith and fair dealing based upon the same arguments and citations as raised in the demurrer. The Court notes “that it is improper for a court to strike a whole cause of action of a pleading under Code of Civil Procedure section 436.” (Quiroz v. Seventh Ave. Center (2006) 140 Cal.App.4th 1256, 1281.)

However, the motion it strike is MOOT based upon the Court’s ruling on the demurrer.