Judge Randolph M. Hammock, Case 22STCV31768 2023-04-12 Tentative Ruling

Judge: Randolph M. Hammock, Case: 22STCV31768, Date: 2023-04-12 Tentative Ruling

Plaintiff GNM, L.P., brings this action against Defendant 4930 Coldwater Canyon Venture, LLC. Plaintiff alleges the parties entered into a purchase and sale agreement for the property at 4930 Coldwater Canyon Ave, Sherman Oaks, CA 91423, with Plaintiff as purchaser and Defendant as seller. Plaintiff alleges it has met all obligations to close escrow and has sent Defendant a Notice to Perform/Demand to Close the Escrow. Defendant, however, has not closed the Escrow. Plaintiff brings causes of action for (1) breach of written contract and (2) breach of the implied covenant of good faith and fair dealing.

Defendant 4930 Coldwater filed a Cross-Complaint against Plaintiff for (1) breach of contract and (2) fraud. Defendant/Cross-Complainant alleges in its First Amended Cross-Complaint that Plaintiff/Cross-Defendant failed to timely deposit money into escrow in breach of the purchase and sale agreement, and then obtained an extension based on alleged misrepresentations. Defendant seeks to rescind the purchase and sale agreement and retain Plaintiff’s initial escrow deposit as liquidated damages.

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal. App. 4th 740, 747.) When considering demurrers, courts read the allegations liberally and in context. (Taylor v. City of Los Angeles Dept. of Water and Power (2006) 144 Cal. App. 4th 1216, 1228.) In a demurrer proceeding, the defects must be apparent on the face of the pleading or by proper judicial notice. (CCP § 430.30(a).) A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. (SKF Farms v. Superior Court (1984) 153 Cal. App. 3d 902, 905.) Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed. (Id.) The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action. (Hahn, 147 Cal.App.4th at 747.)

Plaintiff/Cross-Defendant GNM, L.P. (“GNM”), demurs to the Second Cause of Action for Fraud in the First Amended Cross-Complaint (“FACC”). GNM contends the FACC lacks the essential elements of fraud and fails to plead the claim with the requisite specificity.

Cross-Complainant alleges that “[o]n or about June 17, 2022, GNM, by its agent [Hirsh] Sherman, represented to Coldwater Venture’s agent [Adrienne] Barr, that GNM would close escrow on its purchase of the Property on or before September 9, 2022, if Coldwater Venture would agree to extend the close of escrow from August 25, 2022, to September 9, 2022.” (FACC ¶ 47.) Cross-Complainant alleges this statement was “expressly made not contingent on financing for the purchase of the Property” and “was false and misleading.” (Id. ¶¶ 48, 49.) At the time of the statement, GNM’s general partner, Gary Hartunian, “knew that he was not willing either to purchase the Property without a loan or to purchase the Property with a bridge loan until he could secure permanent financing to purchase the Property but failed to disclose these facts to Seller.” (Id. ¶ 50.) Thus, GNM’s promise to close escrow no later than September 9, 2022, without having to obtain a loan to purchase the Property “was false in that Gary Hartunian knew that he could not or would not purchase the Property without a purchase money loan.” (Id. ¶¶ 51, 52.)

Cross-Complainant alleges it “reasonably believed GNM’s representations were true,” and reasonably relied on those representations when it “agreed to give GNM an extension to close escrow on September 9, 2022.” (Id. ¶¶ 53, 54.) Cross-Complainant alleges that “[b]ut for GNM’s representation,” it “would not have agreed to extend the close escrow to September 9, 2022 and would have required GNM to comply with the PSA by closing escrow on or before August 25, 2022.” (Id. ¶ 54.) As a result, Cross-Defendant “has suffered consequential damages in such amount as will be proven at trial.” (Id. ¶ 56.)

“The elements which must be pleaded to plead a fraud claim 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.’ ” (Philipson & Simon v. Gulsvig (2007) 154 Cal. App. 4th 347, 363.) Fraud-based claims are subject to strict requirements of particularity in pleading. (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216.) To advance a cognizable fraud claim, “every element of the cause of action . . . must be alleged in full, factually and specifically, and the policy of liberal construction of pleading will not usually be invoked to sustain a fraud claim deficient in any material respect.” (Wilhelm v. Pray, Price, Williams & Russell (1986) 186 Cal.App.3d 1324, 1331).

Cross-Defendant first contends Cross-Complainant cannot plead the third element for fraud, intent to defraud, because “GNM’s statements (or predictions) as to a future closing date were mere opinion that is not actionable.” (Dem. 10: 5-6; citing Cansino v. Bank of America (2014) 224 Cal.App.4th 1462, 1469 [“Statements or predictions regarding future events are deemed to be mere opinions which are not actionable.”].)

As plead, however, Cross-Complainant does not allege an opinion, but rather, the flat statement that “Buyer needed another 15 days to close escrow and that it could and would close escrow on or before September 9, 2022.” (FACC ¶ 15 [emphasis added].) In making that representation, Cross-Defendant agreed its deposit was not contingent on obtaining financing. (Id. ¶ 16.) Cross-Defendant’s managing partner, however, “knew that he was not willing either to purchase the Property without a loan or to purchase the Property with a bridge loan until he could secure permanent financing to purchase the Property but failed to disclose these facts to Seller.” (Id. ¶ 50.) Therefore, Cross-Complainant has alleged an intent to defraud.

Cross-Defendant also argues Cross-Complainant did not “justifiably rely” on the representation because “both parties were privy to the same facts concerning closing.” (Dem. 10: 21-22.) This issue ultimately comes down to evidentiary facts that cannot be resolved on a demurrer. A demurrer tests the pleading alone and not any extrinsic matters. (SKF Farms v. Superior Court (1984) 153 Cal. App. 3d 902, 905.) For present purposes, Cross-Complainant has alleged that Cross-Complainant “reasonably believed GNM’s representations were true.” (Id. 53.) Therefore, Cross-Complainant has alleged justifiably reliance.

Cross-Defendant next argues that Cross-Complainant has not alleged damages based on the misrepresentation because “[t]here’s no allegation that 4930 CCV suffered anything that wouldn’t have occurred even in the absence of the alleged fraud.” (Dem. 11: 20-21.) Whether the extra 15 days Cross-Complainant had to wait to cancel the contract resulted in damages need not be determined now. For pleadings purposes, this is enough to allege damages.

Lastly, the court disagrees that the pleading is uncertain. “[D]emurrers for uncertainty are disfavored,” and are strictly construed “because ambiguities can reasonably be clarified under modern rules of discovery.” (Lickiss v. Fin. Indus. Regul. Auth., (2012) 208 Cal. App. 4th 1125, 1135.)

Any party may submit on the tentative ruling by contacting the courtroom via email at Smcdept49@lacourt.org by no later than 4:00 p.m. the day before the hearing. All interested parties must be copied on the email. It should be noted that if you submit on a tentative ruling the court will still conduct a hearing if any party appears. By submitting on the tentative you have, in essence, waived your right to be present at the hearing, and you should be aware that the court may not adopt the tentative, and may issue an order which modifies the tentative ruling in whole or in part.