Judge Ralph C. Hofer, Case Number: 23GDCV01056, Date: 2023-09-08 Tentative Ruling

Plaintiff Griffith Park Rehabilitation Center, LLC alleges that in November 2018, plaintiff leased property in Glendale pursuant to a Lease Agreement with the owner of the property, defendant Panorama Convalescent Hospital Inc., for the operation of a licensed skilled nursing facility. Plaintiff alleges that to induce plaintiff into entering into the Lease, the parties agreed that plaintiff had the right to assign the Lease conditioned upon payment of $250,000 to defendants as an assignment fee. Defendant agreed that its consent to an assignment would not be unreasonably withheld.

The complaint alleges that plaintiff has notified defendant of a purported assignment to Chaim Kolodny, and stands ready, willing, and able to pay the required assignment fee, but defendant wrongfully refuses to assign the lease. Plaintiff alleges that Chaim Kolodny is experienced in the operation of skilled nursing facilities, including plaintiff’s facility, but defendant refuses to accept the assignment to him, which plaintiff believes is motivated by defendant’s intention to obtain for itself the value of plaintiff’s business operations without compensation. Plaintiff alleges that defendant has breached the terms of the Lease by unreasonably refusing Chaim Kolodny as transferee without justification, as a result of which plaintiff has suffered damages.

To state a cause of action for fraud, plaintiff must plead the following elements: A false representation, actual or implied, or concealment of a matter-of-fact material to the transaction which defendant had a duty to disclose, or defendant’s promise made without intention to perform; defendant’s knowledge of the falsity; defendant’s intent to deceive; plaintiff’s justifiable reliance thereon; and resulting damage to plaintiff. Pearson v. Norton (1964) 230 Cal.App.2d 1.

“The elements of promissory fraud ... are: (1) a promise made regarding a material fact without any intention of performing it; (2) the existence of the intent not to perform at the time the promise was made; (3) intent to deceive or induce the promisee to enter into a transaction; (4) reasonable reliance by the promisee; (5) nonperformance by the party making the promise; and (6) resulting damage to the promisee.”

In Rossberg, the court of appeal affirmed a trial court order sustaining a demurrer without leave to amend in a case where it found plaintiffs homeowners had failed to adequately allege the existence of an enforceable agreement with defendants financial institutions to modify plaintiffs’ loans, or that defendants failed to comply with any of the statutory requirements for conducting a nonjudicial foreclosure. Rossberg, at 1486.

“‘A plaintiff asserting fraud by misrepresentation is obliged to ... “ ‘establish a complete causal relationship’ between the alleged misrepresentations and the harm claimed to have resulted therefrom.” ’ [Citation.]” (Beckwith, supra, 205 Cal.App.4th at p. 1062, 141 Cal.Rptr.3d 142.) This requires a plaintiff to allege specific facts not only showing he or she actually and justifiably relied on the defendant's misrepresentations, but also how the actions he or she took in reliance on the defendant's misrepresentations caused the alleged damages. (Ibid.)”

In Rossberg, the court of appeal found that the homeowners had not alleged any specific damages they suffered as a result of the promised loan modifications, and that they did not allege their reliance on the promised loan modifications caused them to default on their loans or prevented them from curing their existing defaults. The court of appeal rejected an argument that the promised loan modifications induced the homeowners to continue making payments instead of obtaining a replacement loan because such a theory had not been alleged in the first amended complaint, and the court also noted that the homeowners in any case had failed to provide facts showing they had sufficient equity in their home and sufficient income to qualify for a replacement loan. Rossberg, at 1499-1500.

Defendant here argues that there are no details alleged here with respect to how the plaintiff was harmed due to the alleged misrepresentation, and no complete causal link between the alleged misrepresentation and the harm, as there is no alleged harm flowing from the decision to enter the Lease in 2018.

A review of the pleading here shows that the pleading factually alleges that plaintiff entered into a long terms Lease of which a material term was that consent to an assignment could not be unreasonably withheld, for which a substantial $250,000 payment was negotiated. [Complaint, paras. 11, 19, 20]. It is expressly alleged that the defendants intended to withhold approval of assignment of the lease to obtain ownership of the skilled nursing facility for themselves. [Complaint, paras. 23]. The facts alleged include that the plaintiff built up the value of the business operations, including providing the proposed transferee with experience in the operation and management of plaintiff’s skilled nursing facility. [Complaint, paras. 13-14]. The complaint alleges facts explaining the reasonableness of reliance:

“Plaintiff's reliance on the promise was reasonable and proper, given that Defendants represented themselves to be commercial landlords knowledgeable in the operation of skilled nursing facilities and the fact that such facilities are routinely the subject of a lease assignment.”

This scenario is clearly not a situation where no causal connection has been alleged, as plaintiff negotiated the transfer term, then worked for years to build a successful business to be able to sell and assign the Lease, not realizing that defendant had never intended to permit assignment, but intended to take advantage of plaintiff’s effort, and have plaintiff’s business ultimately reverted to lessor so that defendant could reap the value plaintiff had built in the business.

Defendant also argues that the cause of action is not alleged with sufficient specificity. Generally, in a fraud cause of action, a plaintiff must allege specifically how, what, where, to whom and by what means a defendant made a misrepresentation. Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73.

However, the complaint sufficiently alleges a written promise, as plaintiff attaches a copy of the Lease which contains the alleged material term at Article XV. [Complaint, paras. 11, 19, Ex. A, pp. 34-40]. The complaint alleges that the Lease was entered into in November of 2018, that representations were made by Ronald Meyer, and the Lease specifies the identity of Ronald Mayer on behalf of defendant. [Comp., para. 19, Ex. A]. The Lease identifies Crystal Solorzano as the responsible individual for the tenant, who signed the Lease in which the written promise was made. [Comp., Ex. A, p. 33, 67, p, 8]. The allegations combined with the attachment of the Lease supply the details with respect to the written promise, so that at least one promise is sufficiently specifically alleged. The demurrer is overruled.

“Any person interested under a written instrument, excluding a will or a trust, or under a contract, or who desires a declaration of his or her rights or duties with respect to another, or in respect to, in, over or upon property,... may, in cases of actual controversy relating to the legal rights and duties of the respective parties, bring an original action or cross-complaint in the superior court for a declaration of his her rights and duties in the premises, including a determination of any question of construction or validity arising under the instrument or contract. He or she may ask for a declaration of rights or duties, either alone or with other relief; and the court may make a binding declaration of these rights or duties, whether or not further relief is or could be claimed at the time. The declaration may be either affirmative or negative in form and effect, and the declaration shall have the force of a final judgment. The declaration may be had before there has been any breach of the obligation in respect to which said declaration is sought.”

“A complaint for declaratory relief is legally sufficient if it sets forth facts showing the existence of an actual controversy relating to the legal rights and duties of the parties under a written instrument or with respect to property and requests that the rights and duties of the parties be adjudged by the court. (Code Civ. Proc., § 1060; Maguire v. Hibernia Sav. and Loan Soc. (1944) 23 Cal.2d 719.”

Here, the pleading incorporates all previous allegations, and alleges that plaintiff claims that it is entitled to an order of the court compelling the transfer of the Lease to the proposed licensee, and defendant contends the proposed licensee is not suitable, so that a judicial determination is necessary. [Comp., paras. 27, 28].

The demurrer argues that the complaint alleges that plaintiff has already suffered damages due to the alleged breach of contract based on the same alleged conduct, and since the breach of contract cause of action has already accrued it focuses on past wrongs, which is not the proper subject of declaratory relief.

The cause of action is obviously brought for an order concerning the future conduct of the parties with respect to their contractual rights, duties and obligations, and is a classic example of an appropriate declaratory relief claim.

Defendant also argues that the cause of action duplicates that breach of contract claim. The cause of action does not duplicate the breach of contract claim, which seeks damages caused by the alleged breach, when this cause of action seeks a determination of those contractual rights and duties going forward between the parties. Moreover, under the liberal rules of pleading, parties are permitted to plead duplicative, alternative, or even inconsistent causes of action. See Jackson v. County of Los Angeles (1997, 2nd Dist.) 60 Cal.App.4th 171, 177, 180; Adams v. Paul (1995) 11 Cal.4th 583, 593 (“a party may plead in the alternative and may make inconsistent allegations.”). In addition, the duplicative standard referred to by defendant is not currently listed as a ground to sustain a demurrer under CCP § 430.10. See Blickman Turkus, LP v. MF Downtown Sunnydale, LLC (2008) 162 Cal.App.4th 858, 890 (“This is not a ground on which a demurrer may be sustained.”)

The Unfair Business Practices Act is not confined to anticompetitive business practices but is also directed toward the public’s right to protection for fraud, deceit, and unlawful conduct, and courts have thus “consistently interpreted the language of section 17200 broadly.” Community Assisting Recovery, Inc. v. Aegis Security Ins. Co. (2001 2nd Dist.) 92 Cal.App.4th 886, 891, quoting South Bay Chevrolet v. General Motors Acceptance Corp. (1999) 72 Cal.App.4th 861, 877.

Defendant argues that this cause of action is not proper because plaintiff has an adequate remedy at law. However, as discussed above, it is clear that plaintiff may not have an adequate remedy at law if it is forced to forfeit its bargained-for right to transfer the lease to another party willing to pay for plaintiff’s business. Again, as discussed above, plaintiff is entitled to allege even inconsistent causes of actions. Moreover, the cause of action is brought to address the conduct as it relates to “other skilled nursing facilities operated by other tenants of the Defendants.” [Comp., para. 30]. The demurrer on this ground is overruled.

Defendant also argues that the pleading fails to allege conduct independently wrongful of the alleged breach of contract. However, the pleading alleges fraudulent conduct, and fraudulent conduct which it is alleged affects parties beyond plaintiff. [Comp., para. 30]. The cause of action is sufficiently stated at the pleading stage under the broad interpretation of the statute, and the demurrer is overruled.

In this case, with respect to the second cause of action for false promise, a claim of fraud, punitive damages are appropriately stated. A properly pleaded fraud claim will itself support recovery of punitive damages; no allegations of malice or intent to injure are required. Stevens v. Superior Court (1986, 2nd Dist.) 180 Cal.App.3d 605, 610-611. The motion is denied on this ground.

Defendant argues that the complaint seeks attorney’s fees in connection with plaintiff’s second cause of action for false promise, when there is no basis for awarding such fees in connection with this standard tort claim.

Here, the prayer seeks attorney’s fees, but there is no allegation in that prayer whether these are sought pursuant to statute or contract. The complaint, however, is clearly based on a Lease, attached to the pleading, which includes an attorney’s fees clause. [Ex. A, section 17.2 (k), p. 47]. Defendant apparently recognizes this, as it has not sought to strike the prayer for attorney’s fees in connection with the breach of contract cause of action. It is not clearly established at this point in the litigation whether that contractual provision is broad enough to encompass a claim involving alleged false promise in inducing that contract. The motion to strike accordingly is denied.

Defendant argues again that that cause of action does not allege that legal remedies are inadequate sufficient to give rise to equitable remedies. As discussed above, the cause of action if properly stated gives rise to equitable remedies, including the equitable remedies of injunctive relief, appointment of a receiver, and orders “as may be necessary to restore to any person in interest any money or property, real or personal, which may have been acquired by means of such unfair competition.” Business & Professions Code section 17203.

Defendant alleges that circumstances warranting an injunction are not alleged, but it is alleged that an injunction is necessary to ensure that the proposed transferee can step in and operate the ongoing business. [Comp., paras. 13, 14, 22-24, 28, 30]. The motion to strike is denied on this ground.

Defendant also argues that there is no allegation explaining how defendant profited from its behavior, and plaintiff does not identify any profits of defendants to disgorge. There is no legal authority cited which imposes such pleading requirements for such a remedy. The motion to strike is denied on this ground as well.

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