Judge Randolph M. Hammock, Case 22STCV31885 2023-05-09 Tentative Ruling

Judge: Randolph M. Hammock, Case: 22STCV31885, Date: 2023-05-09 Tentative Ruling

Plaintiff Tom Trading Co., LTD, a garment manufacturer based in China, alleges Defendant ordered merchandise from Plaintiff. Plaintiff alleges it filled and shipped the orders to Defendant, but Defendant failed to make payment. Plaintiff brings causes of action or (1) breach of contract, (2) breach of the implied covenant of good faith and fair dealing, (3) intentional misrepresentation, and (4) unjust enrichment. [FN 1]

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.)

Defendant first demurrers to the breach of contract cause of action, arguing there is a discrepancy between the damages sought in the Complaint and the damages reflect in the attached invoices.

Plaintiff, a Chinese garment manufacturer, alleges that “Defendant placed numerous orders for merchandise” and that Plaintiff “filled and shipped [the orders] to the Defendant” in the United States. (Compl. ¶ 7.) Plaintiff alleges the “agreed upon payment term for all invoices between Plaintiff and Defendant was and is Net 7 days.” (Id. ¶ 8.) However, “Defendant began delaying payments and ultimately stopped making payments,” and instead, “started giving Plaintiff excuses for not paying for the products it ordered.” (Id. ¶ 9.) Defendant assured Plaintiff, however, that it was “committed [to] catching up on its payments.” (Id.)

Plaintiff alleges it delivered but has not received payment for the following orders: (1) $219,989.75 on October 15, 2021; (2) $20,732.20 on December 15, 2021; (3) $345,629.55 on January 15, 2022; (4) $255,463.40 on January 30, 2022; and (5) $139,340.70 between March 31 and May 10, 2022. (Id. ¶¶ 10-14,) Plaintiff also alleges it made in additional shipment for $57,902.30, that Defendant “failed to pick up” from the Port of Los Angeles, “which resulted in an exorbitant amount of demurrage charges.” (Id. ¶ 16.)

Plaintiff alleges it has suffered damages “in excess of $580,902.29.” (Id. ¶ 18.) Plaintiff attached to the Complaint as Exhibit A a purchase order in the amount of $37,520.00. (Id. ¶ 17, Exh. A.) It also attaches as Exhibit B an invoice for $12,314.00. (Id. 18.)

However, as noted by Defendant, the amounts reflected in these exhibits are not listed in the Complaint as an order for which Plaintiff has not received payment. (See id. ¶¶ 10-14.) They also amount to only a small portion of the damages that Plaintiff seeks. Thus, it is unclear whether Exhibits A and B are alleged to be just one of multiple unpaid invoices/purchase orders actually at issue, or just meant to be demonstrative of the invoices between the parties. Plaintiff’s opposition has failed to clarify this discrepancy.

Although these defects could potentially be remedied through discovery, because the demurrer is sustained on other grounds with leave to amend (discussed below), Plaintiff should also amend the Complaint to fix or clarify the inconsistencies.

Accordingly, Defendant’s Demurrer to the First Cause of Action is SUSTAINED, with 30 days leave to amend. Plaintiff should amend to plead the terms of the invoices at issue, and/or attach the same as exhibits to remedy the ambiguity.

To establish breach of good faith and fair dealing, a Plaintiff must allege that: (1) the parties entered into a contract; (2) Plaintiffs fulfilled their contractual obligations; (3) any conditions precedent to Defendant’s performance occurred; (4) Defendants unfairly interfered with Plaintiff’s right to receive the benefits of the contract; and (5) Plaintiffs were harmed by Defendant’s conduct. (CACI No. 325.)

Defendant contends there is no claim for breach of the implied covenant as between merchants. Defendant cites no authority for this position in its motion or reply. And for good reason: it is well settled that “every contract imposes upon each party a duty of good faith and fair dealing.” (Jonathan Neil & Associates, Inc. v. Jones (2004) 33 Cal.4th 917, 937.) This argument fails.

Defendant then contends the breach of implied covenant claim fails because Plaintiff has alleged no facts beyond the contractual breach. “If the allegations [of breach of the implied covenant] do not go beyond the statement of a mere contract breach and, relying on the same alleged acts, simply seek the same damages or other relief already claimed in a companion contract cause of action, they may be disregarded as superfluous as no additional claim is actually stated.” (Careau & Co. v. Sec. Pac. Bus. Credit, Inc. (1990) 222 Cal. App. 3d 1371, 1395.)

Here, Plaintiff alleges Defendant “illegally withh[eld] the goods without justification, [held] goods hostage, [and] provid[ed] false information.” (Compl. ¶ 29.) Thus, at least as plead, the claim is not necessarily superfluous of the breach of contract claim, because it alleges wrongdoing beyond the breach itself.

Defendant contends that Plaintiff has not pled the intentional misrepresentation cause of action with the requisite particularity for fraud-based claims. In opposition, Plaintiff attempts to distinguish between fraud and intentional misrepresentation—claiming intentional misrepresentation need not be plead with particularity. But the two are interchangeable and require the same elements. (See Anderson v. Deloitte & Touche (1997) 56 Cal. App. 4th 1468, 1474.)

To plead fraud, a Plaintiff must allege “(1) a representation, (2) that is false, (3) made with knowledge of its falsity, and (4) with an intent to deceive, coupled with (5) actual detrimental reliance and (6) resulting damage.” (Lim v. The.TV Corp. Internat. (2002) 99 Cal. App. 4th 684, 694.) 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).

Here, Plaintiff alleges in conclusory fashion that Defendant “misrepresented their true intentions when initially forming the business relationship between Plaintiff and Defendants,” and had the true intention “to obtain Plaintiff’s products without paying for all of the products ordered.” (Compl. ¶ 32.) Defendant allegedly “later misrepresented their intentions [to] ‘catch up’ on their outstanding balances.” (Id.) Plaintiff, however, does not include even the rough content of the alleged misrepresentations, nor who made them or when. This fails to meet the heightened pleading requirements for fraud.

Generally speaking, leave to amend must be allowed where there is a reasonable possibility of successful amendment. Goodman v. Kennedy (1976) 18 Cal.3d 335, 348. Plaintiff must demonstrate this possibility at the hearing consistent with this ruling. If Plaintiff doesn’t, no leave to amend will be given as to this cause of action.

Defendant first contends that unjust enrichment is not a standalone cause of action. The elements of an unjust enrichment claim are the “receipt of a benefit and [the] unjust retention of the benefit at the expense of another.” (Lectrodryer v. SeoulBank (2000) 77 Cal.App.4th 723, 726.) The modern trend appears to take the position that unjust enrichment is a claim for restitution rather than a separate cause of action. (See De Havilland v. FX Networks, LLC (2018) 21 Cal.App.5th 845.)

Accordingly, Defendant’s Demurrer to the Fourth Cause of Action is SUSTAINED with leave to amend. Plaintiff may include a claim for restitution not as a standalone cause of action, but in its prayer for relief.

Judge of the Superior Court

FN 1 - The case is related to Gladden Far East, LTD v. Starship, LLC (22STCV34532) also in Department 49. The cases involve the same Defendant, the same causes of action, and nearly identical allegations. It also appears the Plaintiffs in each case may share a common ownership or management.

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.