Judge: Nathan R. Scott, Case: Nicholson v. Bederman, Date: 2022-12-02 Tentative Ruling
Demurrer
Cross-defendants Thomas Q. Nicholson and T. Quinn Nicholson Ltd.’s demurrer is sustained as to the 4th cause of action and is otherwise overruled.
Cross-complainants Stacey Samuel Bederman and Eden C. Bederman (as trustees) shall have leave to file and serve an amended cross-complaint within 15 days.
1st cause of action, breach of written contract. The cross-complaint states facts sufficient to state this cause of action. (See Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821 [breach of contract elements]; see also Cross-compl. ¶¶ 13-16, 21 [contract], 31 [cross-complainants’ performance], 22, 24, 27-30 [cross-defendants’ breach], 32 [damages].)
The cross-complaint adequately alleges cross-defendant Thomas Q. Nicholson’s alter ego liability. (See Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 235-236 [alter ego may be alleged as ultimate fact]; Robbins v. Blecher (1996) 52 Cal.App.4th 886, 892 [alter ego elements]; see also Cross-compl. ¶¶ 9 [Nicholson uses the company “to evade California Contractor License requirements and statutes governing the construction of homes in California”], 33.)
2nd cause of action, breach of implied covenant. The cross-complaint states facts sufficient to constitute this cause of action. (See Racine & Laramie, Ltd. v. Department of Parks & Recreation (1992) 11 Cal.App.4th 1026, 1031-1032 [implied covenant “prevent[s] a contracting party from engaging in conduct which . . . frustrates the other party’s rights to the benefits of the contract”]; see also Cross-compl. ¶ 30 [alleging cross-defendants failed to comply with statutory requirements].)
3rd cause of action, negligence. The cross-complaint states facts sufficient to constitute this cause of action. (See Ladd v. County of San Mateo (1996) 12 Cal.4th 913, 917 [elements]; Michaelis v. Benavides (1998) 61 Cal. App. 4th 681, 687-688 [contract imposes duty of care to perform services competently and reasonably]; Perry v. Robertson (1988) 201 Cal.App.3d 333, 340 [permitting pleading alternative tort and contract theories]; see also Cross-compl. ¶¶ 13-16, 21, 44, [duty imposed by contract], 17-24, 45 [breach], 46 [proximately caused damages].)
4th cause of action, fraud and deceit. The cross-complaint fails to state facts sufficient to constitute this cause of action. (See Lazar v. Superior Court (1996) 12 Cal.4th 631, 639, 645 [elements; specific pleading requirement].)
While the cross-complaint alleges representations “beyond those contained in the integrated agreements” (Dem. at p. 7) – it alleges misrepresentations “continuing through March 2022” (Cross-compl. ¶ 49) – it fails to allege “‘“how . . . and by what means the representations were tendered.”’” (Lazar, at p. 645; see also Cross-compl. ¶ 49 [“Nicholson . . . represented”].)
On the other hand, the cross-complaint adequately alleges cross-defendants’ intent to defraud, a matter on which cross-defendants necessarily possess superior knowledge. (See Committee on Children’s Television, Inc. v. General Food Corp. (1983) 35 Cal.3d 194, 217; Miles v. Deutsche Bank National Trust Co. (2015) 236 Cal.App.4th 394, 403; Cross-compl. ¶ 51.)
5th cause of action, conversion. The cross-complaint states facts sufficient to constitute this cause of action. (See Lee v. Hanley (2015) 61 Cal.4th 1225, 1240 [elements].) “[C]ases recognizing claims for the conversion of money ‘typically involve those who have misappropriated, commingled, or misapplied specific funds held for the benefit of others.’” (Voris v. Lampert (2019) 7 Cal.5th 1141, 1152.) Here, the cross-complaint adequately alleges cross-defendants misapplied $295,000 paid to them. (Cross-compl. ¶¶ 57-58.)
Motion to Strike
Cross-defendants motion to strike is granted as to the exemplary damages prayers (Cross-compl. p. 16:14, 16) and otherwise denied. (See Code Civ. Proc., §§ 435, 436.)
Cross-complainants shall have leave to file and serve an amended cross-complaint within 15 days.
Exemplary damages. With the demurrer sustained as to the fraud claim, there is no viable cause of action supporting exemplary damages. (See Civ. Code, § 3294, subd. (a).)
Alter ego. These allegations are sufficiently stated for the reasons set forth in the ruling on the demurrer.
Home improvement contract allegations. Whether the contract was a home improvement contract (as cross-complainants allege) or a contract for construction of a single-family home (as cross-defendants contend) is a question of fact which cannot be determined at the pleading stage. (See Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 229 [“we must accept as correct plaintiff's allegations as to the meaning of the agreement”].)
Consequential damages. Whether the damages allegations sought to be stricken are “indirect, consequential, or ‘special’ damages” (Cross-compl. Ex. 1 [“Consequential and Punitive Damages”]) is a question of fact that cannot be determined at the pleading stage.
Illegal conduct allegations. The allegations that cross-defendants acted illegally are relevant to whether they breached the contract, the implied covenant, and their duty of care.
Cross-defendants shall give notice of both rulings.