Judge Olivia Rosales, Case 22NWCV00157 2022-09-22 Tentative Ruling

Judge: Olivia Rosales, Case: 22NWCV00157, Date: 2022-09-22 Tentative Ruling

Case Number: 22NWCV00157 Hearing Date: September 22, 2022 Dept: SEC

ESQUIBEL v. IEV FACTORY, INC

CASE NO.: 22NWCV00157

HEARING: 09/22/22

TENTATIVE ORDER

Defendants IEV FACTORY, INC.; MARTIN KRUSZELNICKI; and YUTAKA MIYAZAKI’s Demurer to Plaintiffs’ Complaint is OVERRULED in part and SUSTAINED with 30 days leave to amend in part.

Opposing Party to give notice.

This action was filed by Plaintiffs STEVE ESQUIBEL; LARA SELLARS; MAHO MITSUYA; and EV FACTORY, INC. (collectively “Plaintiffs”) on March 4, 2022.

The Complaint asserts the following causes of action: (1) Fraud; and (2) Breach of Contract.

Defendants IEV FACTORY, INC.; MARTIN KRUSZELNICKI; and YUTAKA MIYAZAKI (collectively “Defendants”) generally demur to both causes of action.

First Cause of Action – Fraud

The elements of a cause of action for intentional fraud are 1) misrepresentation (false representation, concealment, or nondisclosure); 2) knowledge of falsity (scienter); 3) intent to defraud or induce reliance; 4) justifiable reliance; and 5) damages. (See Cal. Civ. Code §1709.)

The elements of a fraudulent misrepresentation cause of action are: (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or “scienter”); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Engalia v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 974.)

“Fraud must be pleaded with specificity… [t]o withstand a demurrer, the facts constituting every element of the fraud must be alleged with particularity, and the claim cannot be salvaged by references to the general policy favoring the liberal construction of pleadings. (Goldrich v. Natural Y Surgical Specialties, Inc. (1994) 25 Cal.App.4th 772, 782.) “This particularity requirement necessitates pleading facts which ‘show how, when, where, to whom, and by what means the representations were tendered.’” (Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73.) “The requirement of specific in a fraud action against a corporation requires the plaintiff to allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written.” (Tarmann v. State Farm Mut. Auto Ins. Co. (1991) 2 Cal.App.4th 153, 157.)

Plaintiffs allege the following facts in support of this cause of action: “On May 28, 2021, there was a Special meeting of the Board of Directors for THS… At the Special Meeting… Martin, Yutaka, Steve, Lara and Maho confirmed and voted that each Director would have a Twenty Percent (20%) interest in EV Factory Wyoming….” (Complaint ¶15.) “On May 20, 2021, Martin and Yutake executed a Certificate of Amendment of Articles of Incorporation changing THS’ name to IEV Factory. Since the name change to IEV Factory, there has been a problem in communicating with JAC. Plaintiffs allege this is intentional.” (Complaint ¶18.) “At the Board of Directors Meeting of May 28, 2021, the Defendants, and each of them ignored the fact that the individual Plaintiffs were duly elected Directors by Martina and Yutaka, the owners of THS. Plaintiffs did not know that Martin and Yutaka changed the name of THS to IEV Factory.” (Complaint ¶19.) “The Defendants Martin and Yutaka made the representation and agreed at the Directors Meeting including a Special Directors Meeting on May 28, 2021.” (Complaint ¶20.) “Plaintiffs are informed and believe that Martin and Yutaka intended to deceive and intended to defraud Plaintiffs to induce Plaintiffs into continued work until the prototype trucks were completed and ready for shipment.” (Complaint ¶21.) “Plaintiffs were induced to, and did, enter into an agreement to act as Directors for the Hybrid Shop, now known as IEV Factory.” (Complaint ¶22.)

The demurrer to the first cause of action is OVERRULED. Plaintiffs adequately allege that Martin and Yutaka intended to deceive Plaintiffs by secretly changing the name of the corporate entity from THS to IEV Factory, after confirming that each Plaintiff would get a 20% interest in EV Factory (in order to induce Plaintiffs to continue working with them), with the intent to defraud Plaintiffs out of their shareholder interests in THS/EV Factory. Plaintiffs adequately allege facts to support a cause of action for fraud to survive demurrer.

Second Cause of Action – Breach of Contract

Whether it is written, oral, or implied, the elements of a cause of action for breach of contract are as follows: (1) the existence of a contract; (2) Plaintiff’s performance or excused non-performance; (3) Defendants’ breach; and (4) resulting damage to Plaintiff. (Reichert v. General Ins. Co. (1968) 68 Cal.2d 822, 830.) “If an action is based on a breach of written contract, the terms must be set forth verbatim in the body of the complaint or a copy of the contract must be attached and incorporated by reference.” (Id. at 459.) Alternatively, if the claim is based on a written contract, then “a plaintiff may plead the legal effect of the contract rather than its precise language.” (Construction Protective Services, Inc. v. TIG Specialty Ins. Co., (2002) 29 Cal.4th 189, 198-199.)

Plaintiffs allege that “Martina and Yutaka breached the agreement that Plaintiffs would be part of the project to be part of the MOU #2.” (Complaint ¶28.) The demurrer to the second cause of action is SUSTAINED with 30 days leave to amend. Plaintiffs do not allege the terms, whether written, oral, or implied, of the alleged agreement that was breached.