Judge Ralph C. Hofer, Case Number: 23GDV01777, Date: 2023-12-08 Tentative Ruling

Plaintiff A&T Advisors dba Anchor Bookkeeping (Anchor Bookkeeping) alleges that in October of 2022, plaintiff and defendant Cahit Soykat dba Roma Pizza (Soykat) entered into an Agreement for Limited Consulting Services whereby plaintiff agreed to assist, advise, consult, prepare and help defendant to apply for and become eligible for the Employee Retention Credit (ERC) program, pursuant to which a refundable tax credit was made available for businesses and tax exempt organizations that had employees and were affected during the COVID-19 pandemic.

Plaintiff alleges that pursuant to the Agreement, defendant agreed to compensate plaintiff 17.5% of the credit received under the ERC program. The complaint alleges that plaintiff assisted defendant in securing tax credits under the ERC program in the amount of $104,939.21, has sent an invoice to defendant in the amount of $18,364.36 for its services, but defendant has refused to pay for plaintiff’s services.

Plaintiff also alleges that defendant represented to plaintiff that defendant had the financial ability and would compensate plaintiff as agreed, but that this representation was false, or made without reasonable grounds for believing it was true, as plaintiff did not have the financial ability to compensate plaintiff, and that plaintiff relied on and was harmed as a result of the representation.

“(a) Before filing a demurrer pursuant to this chapter, the demurring party shall meet and confer in person or by telephone with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer. If an amended complaint, cross-complaint, or answer is filed, the responding party shall meet and confer again with the party who filed the amended pleading before filing a demurrer to the amended pleading.

(1) As part of the meet and confer process, the demurring party shall identify all of the specific causes of action that it believes are subject to demurrer and identify with legal support the basis of the deficiencies. The party who filed the complaint, cross-complaint, or answer shall provide legal support for its position that the pleading is legally sufficient or, in the alternative, how the complaint, cross-complaint, or answer could be amended to cure any legal insufficiency.

(2) The parties shall meet and confer at least five days before the date the responsive pleading is due. If the parties are not able to meet and confer at least five days prior to the date the responsive pleading is due, the demurring party shall be granted an automatic 30-day extension of time within which to file a responsive pleading, by filing and serving, on or before the date on which a demurrer would be due, a declaration stating under penalty of perjury that a good faith attempt to meet and confer was made and explaining the reasons why the parties could not meet and confer. The 30-day extension shall commence from the date the responsive pleading was previously due, and the demurring party shall not be subject to default during the period of the extension. Any further extensions shall be obtained by court order upon a showing of good cause.

(A) The means by which the demurring party met and conferred with the party who filed the pleading subject to demurrer, and that the parties did not reach an agreement resolving the objections raised in the demurrer.

(B) That the party who filed the pleading subject to demurrer failed to respond to the meet and confer request of the demurring party or otherwise failed to meet and confer in good faith.

There is no meet and confer declaration submitted with this demurrer. The court would be within its discretion to continue the matter and require the parties to meet and confer. However, in light of the lack of objection in the opposition, the court will proceed to consider the demurrer. However, the parties are cautioned that in the future, any meet and confer requirements must be met before the court will consider motions which require advance meet and confer efforts.

Defendant argues that the court has no personal jurisdiction over defendant because plaintiff concedes that defendant is located in Middletown, Connecticut, and does not allege any jurisdictional clauses in the purported agreement which would grant this court jurisdiction over the instant matter.

Defendant relies on CCP § 418.10 which permits a defendant, on or before the last day of his or her time to plead, to serve and file a notice of motion to quash service of summons “on the ground of lack of jurisdiction of the court over him or her.” § 418.10(a)(1). Plaintiff makes a vague argument, unsupported by any evidence, or any documents in the file, that defendant was improperly served in this matter by substituted service on a corporate defendant.

As pointed out in the opposition, and evident from the file, defendant has not filed a motion to quash service of summons on the ground of lack of jurisdiction but has appeared in this action by filing this demurrer.

“A defendant appears in an action when the defendant answers, demurs, files a notice of motion to strike, files a notice of motion to transfer pursuant to Section 396b, moves for reclassification pursuant to Section 403.040, gives the plaintiff written notice of appearance, or when an attorney gives notice of appearance for the defendant.”

(3) Failure to make a motion under this section at the time of filing a demurrer or motion to strike constitutes a waiver of the issues of lack of personal jurisdiction, inadequacy of process, inadequacy of service of process, inconvenient forum, and delay in prosecution.”

Accordingly, case law recognizes under this and other statutory authority that a party’s general appearance under the current circumstances, such as by filing a demurrer, waives that party’s right to challenge personal jurisdiction or the sufficiency of service, even where the party was unaware of the effect of such an appearance:

“By generally appearing, a defendant relinquishes all objections based on lack of personal jurisdiction or defective process or service of process. (Code Civ. Proc. §§ 410.50(a), 418.10(e)(3); In re Vanessa Q. (2010) 187 Cal.App.4th 128, 135, 114 Cal.Rptr.3d 294.) A general appearance has these effects even if the defendant is unaware that a jurisdictional objection is available. (Fireman's Fund Ins. Co. v. Sparks Const., Inc. (2004) 114 Cal.App.4th 1135, 1145, 8 Cal.Rptr.3d 446.) Such an appearance is “equivalent to personal service within this state of the summons and a copy of the petition upon [the defendant].” (Cal. Rules of Court, rule 5.68(c).)

Defendant has failed to file a motion to challenge jurisdiction or service of process and has waived the opportunity to do so by filing this demurrer without at the same time filing such a motion. The demurrer on this ground accordingly is overruled.

Defendant argues that the cause of action for breach of contract is uncertain because it is not clear whether the purported agreement is between the defendant individually or with the business entity, which is material to the instant action.

To plead a cause of action for breach of contract, plaintiff must plead the following elements: Contract formed, and terms alleged verbatim or according to legal effect; plaintiff’s performance or excuse for nonperformance; defendant’s breach; and damage to plaintiff. Walsh v. Standart (1917) 174 Cal. 807.

Plaintiff argues that the complaint alleges each of these elements, and that the parties to the Agreement are clearly alleged in the complaint. The complaint alleges that “Defendant Cahit Soykat is an adult individual doing business as Roma Pizza (‘Soykat’) in Middletown, Connecticut.” [Complaint, para. 2]. It is alleged that “Plaintiff and Soykat entered” into the subject Agreement. [Complaint, para. 7]. Plaintiff argues that case law recognizes that “Use of a fictitious business name does not create a separate legal entity.” Pinkerton’s, Inc. v. Superior Court (1996) 49 Cal.App.4th 1342, 1348. The complaint sufficiently alleges that defendant is sued individually for doing business under another name. The demurrer on this ground is overruled.

Defendant also argues that the cause of action is deficient because it cannot be ascertained from the pleading whether the contract is written, oral, or implied by conduct, and the terms of the alleged Agreement are not alleged verbatim, or a copy of the Agreement attached.

In this case, it cannot be ascertained from the complaint whether the contract alleged is written, oral or implied by conduct, or some specific combination of these forms. The opposition does not indicate where in the pleading the nature of the contract is alleged, or, in fact, what the nature of the contract is.

This consideration is significant because if the Agreement is written, it is generally required that a copy of the written contract be attached to the pleading, or the terms set forth verbatim. Otworth v. Southern Pacific Transportation Co. (1985) 166 Cal.App.3d 452, 459. In Otworth, the Second District stated:

“If the action is based on an alleged breach of a written contract, the terms must be set out verbatim in the body of the complaint or a copy of the written instrument must be attached or incorporated by reference.”

While plaintiff argues in the opposition that this requirement of attaching the written Agreement has since been questioned in case authority, the issue does not appear to be one which must be addressed in connection with the current pleading, as there is no designation yet of the nature of the alleged Agreement, as required under statute. The demurrer is sustained with leave to amend to allege whether the Agreement is written, oral, implied by conduct, or some combination.

Defendant briefly argues that these claims are barred because in general there is no recovery in tort for negligently inflicted “purely economic loss,” meaning financial harm unaccompanied by physical or property damage.

Plaintiff argues in the opposition that the complaint alleges each element of the subject fraud, negligent misrepresentation and quantum meruit causes of action, and also relies on legal authority under which an exception to the economic loss rule is recognized, and tort damages are available in contract-based cases where the contract was fraudulently induced. Dhital v. Nissan North America, Inc. (2022) 84 Cal.App. 5th 828, 839. The court of appeal in Dhital found that the trial court had improperly sustained a demurrer based on the bar of the economic loss rule, noting that the California Supreme Court in Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, had “affirmed that tort damages are available in contract cases where the contract was fraudulently induced.” Dhital, at 839, italics in original, citing Robinson, at 989-990.

The complaint here rests on theories that defendant made representations to plaintiff which caused plaintiff to enter into a contract and perform services plaintiff would not otherwise have entered into or performed. [Complaint, paras. 20-25, 30-35]. This recitation is sufficient to plead around the economic loss rule, and the demurrer on this ground is overruled. To the extent the argument is meant to apply to the fourth cause of action for quantum meruit, the demurrer fails on the additional ground that this does not appear to be a tort cause of action subject to the economic loss rule, but a common count. In any case, generally, common counts are not subject to general or special demurrer. See Moya v. Northrup (1970) 10 Cal.App.3d 276, 279.

No other grounds are argued with respect to the sufficiency of the second through fourth causes of action. The demurrer to these three causes of action accordingly is overruled.

There is no meet and confer declaration submitted with this demurrer, as required under CCP § 430.41. The Court has nevertheless considered the demurrer, only because the opposition has not objected on this ground. The parties are cautioned that in the future this Court in this litigation expects the parties to comply in advance and in good faith with all meet and confer requirements.

Demurrer is SUSTAINED WITH LEAVE TO AMEND to the first cause of action for breach of contract pursuant to CCP § 430.10 (g), as it cannot be ascertained from the pleading whether the contract is written, is oral, or is implied by conduct.

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