Judge: Monica Bachner, Case: 19STCV12600, Date: 2023-02-15 Tentative Ruling

Department 71: Attorneys who elect to submit on these published tentative rulings, without making an appearance at the hearing, may so notify the Court by communicating this to the Department's staff at (213) 830-0771 before the set hearing time.  See, e.g., CRC Rule 324(b).   All parties are otherwise encouraged to appear by Court Call for all matters.

Case Number: 19STCV12600    Hearing Date: February 15, 2023    Dept: 71

Superior Court of California

County of Los Angeles

DEPARTMENT 71

TENTATIVE RULING

Defendant Alfred Palafox’s demurrer to Plaintiff’s second amended complaint is sustained as to the 1st, 3rd, 4th, and 6th causes of action as to Defendant Palafox without leave to amend, sustained as to the 5th cause of action with leave to amend within 15 days, and overruled as to the 2nd cause of action. 

Defendant Alfred Palafox (“Palafox”) (“Defendant”), in pro per, demurs generally to the 1st, 2nd, 3rd, 4th, 5th, and 6th causes of action in Plaintiff John Murray’s (“Murray”) (“Plaintiff”) second amended complaint (“SAC”).

Defendant Palafox demurs on the grounds that the 1st, 2nd, 3rd, 4th, 5th, and 6th causes of action of the SAC fail to state sufficient facts to constitute causes of action because Plaintiff lacks standing to assert any claims against Defendant.  (Notice of Motion; C.C.P. §§430.10(d), (e).)

Background

Plaintiff filed his initial complaint on April 11, 2019.  Plaintiff filed his first amended complaint (“FAC”) on June 12, 2019.  Plaintiff filed the operative SAC on January 23, 2020 against Defendants David Caro (“Caro”), Fernando Montes (“Montes”), Raul Avila (“Avila”), Avfund Capital Group Inc. (“ACG”), Avfund Realty Advisors Inc. (“ARA”), alleging six causes of action: (1) dissolution of partnership and accounting [against Defendants Caro, Montes, and Does 1-10], (2) Breach of Fiduciary Duty [against all Defendants], (3) breach of contract [against Defendants Caro, Montes, and Does 1-10], (4) intentional misrepresentation [against all Defendants], (5) negligent misrepresentation [against all Defendants], and (6) false promise [against all Defendants].  (See SAC.)  Plaintiff’s SAC relates to the alleged improvement of real property located at, 6720 Old Peak Lane, Eastvale, CA, 92860 (“Eastvale”), and 213 N. Magnolia Avenue, Rialto, CA 92376 (“Magnolia”), by Plaintiff and two partners and Plaintiff’s alleged entitlement to dissolution of the entitlement of the partnership and winding up of its affairs.  (See SAC.) On March 16, 2022, Plaintiff filed an amendment to the SAC designating the defendant by the fictitious name of Doe 6 as Defendant Palafox.  (3/16/22 Amendment to Complaint.)  Defendant Palafox filed the instant motion on September 30, 2022.  Plaintiff filed his opposition on January 31, 2023.  Defendant Palafox filed his reply on February 3, 2023.

          Summary of the Demurrer

Defendant Palafox argues Plaintiff lacks standing to assert the 1st, 2nd, 3rd, 4th, 5th, and 6th causes of action against Defendant Palafox because “he is not the proper property [sic], he does not know Plaintiff[,] and was not the agent involved in any of the property sales in Plaintiff[’]s complaint.”  (Demurrer, pg. 6.)

Standing

“Every action must be prosecuted in the name of the real party in interest, except as provided by statute.”  (C.C.P. §367.)  A party who invokes the judicial process lacks standing if it “does not have a real interest in the ultimate adjudication because [it] has neither suffered nor is about to suffer any injury of sufficient magnitude reasonably to assure that all of the relevant facts and issues will be adequately presented.”  (Schmier v. Supreme Court (2000) 78 Cal.App.4th 703, 707.)  “When a complaint fails to state a cause of action in favor of the plaintiff, a demurrer . . . will be sustained.”  (Id., citation omitted.)

Plaintiff does not contest Defendant Palafox’s demurrer to the 1st, 3rd, 4th, and 6th causes of action as to Defendant Palafox alone because such causes of action are not directed to Defendant Palafox who is a licensed real estate broker.  (Opposition, pg. 1.)  As such, only the 2nd and 5th causes of action remain at issue.

Breach of Fiduciary Duty (2nd COA)

To state a cause of action for breach of fiduciary duty, a plaintiff must allege the following elements: (1) the existence of a fiduciary duty; (2) breach of that duty; and (3) damage caused by the breach.  (Gutierrez v. Girardi (2011) 194 Cal.App.4th 925, 932; citing Stanley v. Richmond (1995) 35 Cal.App.4th 1070, 1086.)  To plead a cause of action for breach of fiduciary duty, a plaintiff must allege facts showing the existence of a fiduciary duty owed to that plaintiff, a breach of that duty and resulting damage.  (Pellegrini v. Weiss (2008) 165 Cal.App.4th 515, 524.)  A fiduciary duty is founded upon a special relationship imposed by law or under circumstances in which “confidence is reposed by persons in the integrity of others” who voluntarily accept the confidence.  (Tri-Growth Centre City, Ltd. v. Silldorf, Burdman, Duignan & Eisenberg (1989) 216 Cal.App.3d 1139, 1150; see CACI 4100, et seq.)

Plaintiff’s cause of action alleges, on information and belief, that, at all times, each Defendant was the agent of each and every other Defendant and, in doing the things alleged herein, was acting in the course and scope of its/his/her agency and/or employment and was acting with the consent, permission, and authorization of each and every remaining Defendant and the acts and conduct of each Defendant was ratified and approved by the officers, directors and/or managing agents of every remaining Defendant, whose identifies are not yet known.  (SAC ¶9.)  Plaintiff alleges Defendant Caro, a licensed real estate agent, individually and as an agent with Defendants Avila, ACG, and ARA, working within the scope of his employment with the individual and entity defendants, caused Plaintiff to repose trust and confidence in defendants in connection Plaintiff’s investment in real estate deals.  (SAC ¶40.)  Plaintiff alleges based on such trust and confidence, Plaintiff retained Defendants Caro, Avila, ARA and ACG as real estate agent and real estate brokers to sell the Eastvale and Magnolia properties which he co-owned with Defendant Montes.  (SAC ¶41.)  Plaintiff alleges a fiduciary relationship was created between Defendants Caro, Avila, ACG, and ARA as licensed real estate agent and brokers on the one hand, and Plaintiff on the other hand, which required defendants to act with the utmost good faith for the benefit of their client.  (SAC ¶42.)  Plaintiff alleges Defendants voluntarily accepted a fiduciary role with respect to Plaintiff including the duty to act with the utmost good faith, loyalty, and in the best interests of Plaintiff.  (SAC ¶43.)  Plaintiff alleges when the properties were sold, defendants intentionally structured the final distribution of funds in such a manner that Plaintiff was not paid nor reimbursed for his acquisition funds, maintenance, and improvement costs related to each property, before direction a distribution of proceeds after sale, and in doing so, defendants improperly acted in favor of other partners and themselves, and against the interests of Plaintiff.  (SAC ¶¶44, 45.)  Plaintiff alleges real estate agents and real estate brokers owe a fiduciary duty to their clients that imposes on real estate agents and real estate brokers a duty to act with the utmost good faith in the best interests of their clients.  (SAC ¶46.)  Plaintiff alleges every agent owes his principal the duty of undivided loyalty and during the course of his agency, he may not undertake or participate in activities adverse to the interests of his principal.  (SAC ¶47.)  Plaintiff alleges inherent in each of these relationships is the duty of undivided loyalty the fiduciary owes to its beneficiary, imposing on the fiduciary obligations, far more stringent than those required of ordinary contractors.  (SAC ¶48.)  Plaintiff alleges defendants in connection with the sales of the Eastvale and Magnolia properties knowingly or recklessly violating their fiduciary duties, including their duties of loyalty, good [faith] and independence owed to Plaintiff, or are aiding and abetting others in violating those duties.  (SAC ¶49.)  Plaintiff alleges Defendant Caro, individually and as the agent of Defendants Avila, ARA and ACG failed to act as a reasonably careful licensed real estate agent would have acted under the same or similar circumstances.  (SAC ¶50.)  Plaintiff alleges Defendant Caro, individually and as the agent of Avila, ARA and ACG failed to disclose that he was acting in his own self interest, as Defendant Caro was earning commission on the purchase of the homes by Plaintiff and also earning commission by selling the homes.  (SAC ¶51.)  Plaintiff alleges as a direct result, he was harmed, Defendants’ conduct was a substantial factor in causing Plaintiff’s harm, Defendants have acknowledged their actions and have understood the damage they caused to Plaintiff, and Defendants have promised to reimburse Plaintiff for his unpaid costs; but have failed to carry through with their assurances of repayment.  (SAC ¶¶54-57.)

Defendant Palafox argues Plaintiff lacks standing to assert any claims against him in that Defendant Palafox had no fiduciary duty “as he never exchanged any words or did he ever know the plaintiff or defendants involved in this case.”  (Demurrer, pg. 4.)  Defendant’s argument is unavailing, as he directs this Court take judicial notice of extrinsic evidence that is not properly noticed and is outside the four corners of Plaintiff’s complaint.  (C.C.P. §430.30; Evid. Code §452.)

Plaintiff sufficiently alleges he has standing to allege his cause of action against Defendant Palafox.   Plaintiff alleges Defendant Palafox, as Doe 6, was the agent of each and every other Defendant and, in doing the things alleged herein, was acting in the course and scope of its/his/her agency and/or employment and was acting with the consent, permission, and authorization of each and every remaining Defendant and the acts and conduct of each Defendant was ratified and approved by the officers, directors and/or managing agents of every remaining Defendant, whose identifies are not yet known.  (SAC ¶9.)  Plaintiff sufficiently alleges Defendant Palafox was the agent of Defendant Caro, a licensed real estate agent, and Defendants Avila, ACG and ARA, real estate brokers, who entered into a fiduciary relationship with Plaintiff.  (SAC ¶¶40-42.)  Accordingly, Plaintiff’s demurrer to the second cause of action is overruled.

Negligent Misrepresentation (5th COA)

A cause of action for negligent misrepresentation requires the following elements: (1) assertion of an untrue fact; (2) honestly made in the belief it is true; (3) but without a reasonable ground for such belief; (4) defendant’s intent to induce plaintiff’s reliance upon the representation; (5) plaintiff’s justifiable reliance upon the representation; and (6) resulting damage.  (Melican v. Regents of University of California (2007) 151 Cal.App.4th 168, 182; County of Kern v. Sparks (2007) 149 Cal.App.4th 11, 20; Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 173-174; Charnay v. Cobert (2006) 145 Cal.App.4th 170, 185 n.14 [requiring pleading particularity with facts that show how, when, where, to whom, and by what means the representations were tendered].)

Plaintiff’s cause of action alleges, on information and belief, that, at all times, each Defendant was the agent of each and every other Defendant.  (SAC ¶9.)  Plaintiff alleges Defendants represented to Plaintiff that a fact was true; specifically, that defendants were acting for the benefit of the contract.  (SAC ¶82.)  Plaintiff alleges this representation was false, as defendants, especially Defendant Caro, was acting in their own self interest, as Defendant Caro was earning commission on the purchase of the homes by Plaintiff and also earning commission by selling the homes.  (SAC ¶83.)  Plaintiff alleges, on information and belief, that Defendant Caro pushed for the sale of homes to Plaintiff so that he could earn commission to the detriment of Plaintiff, without regard to Plaintiff.  (SAC ¶84.)  Plaintiff alleges Defendants have promised to reimburse Plaintiff for his unpaid costs; but have failed to carry through with their assurances of repayment.  (SAC ¶85.)  Plaintiff alleges although Defendants may have honestly believed the representations were true, Defendants had no reasonable grounds for believing the representations were true when they made it.  (SAC ¶86.)  Defendants intended that Plaintiff rely on the representations.  (SAC ¶87.)  Plaintiff alleges he reasonably relied on Defendants’ representations, which has caused Plaintiff to incur, including but not limited to, debt, expenses and damage to his credit, was harmed and suffers from severe emotional distress, and his reliance on Defendants’ representations was a substantial factor in causing his harm.  (SAC ¶¶88-90.)

Defendant Palafox argues Plaintiff lacks standing to assert a claim of negligent misrepresentation against him in that Defendant Palafox “never exchanged any words nor did he ever know the plaintiff or defendants involved in this case.”  (Demurrer, pg. 4.)  Defendant’s argument is unavailing, as he directs this Court take judicial notice of extrinsic evidence that is not properly noticed and is outside the four corners of Plaintiff’s complaint.  (C.C.P. §430.30; Evid. Code §452.)  As discussed above, Plaintiff sufficiently alleges he has standing to allege his cause of action against Defendant Palafox.  (SAC ¶9.) 

However, Plaintiff’s fifth cause of action fails to allege with specificity how, when, where, to whom, and by what means the representations were tendered.  (Charnay, 145 Cal.App.4th at pg. 185 n.14.)  In light of Plaintiff’s amendments to name previously fictitious parties, the Court grants Plaintiff leave to amend the fifth cause of action. 

Based on the foregoing, Defendant Palafox’s general demurrer to the SAC is sustained as to the 1st, 3rd, 4th, and 6th causes of action as to Defendant Palafox without leave to amend, sustained as to the 5th cause of action with leave to amend, and overruled as to the 2nd cause of action. 

Dated:  February ____, 2023

Hon. Monica Bachner

Judge of the Superior Court