Wong Properties Limited Partnership v. Drake Real Estate Group, et al.

DEMURRER TO THE COMPLAINT

 

MOVING PARTY: Defendant Christopher Charles Drake

RESPONDING PARTY(S): Plaintiff Wong Properties Limited Partnership; Defendant AAG Services, Inc.

STATEMENT OF MATERIAL FACTS AND/OR PROCEEDINGS:

Plaintiff Wong Properties Limited Partnership owns a 44-unit apartment building at 3320 Rowena Avenue, Los Angeles, CA. Plaintiff alleges it contracted with Defendants Drake Real Estate Group and Christopher Charles Drake whereby Defendants would manage the property. Plaintiff alleges that Defendants presented a plan for interior renovations of the apartments. Defendants, however, allegedly failed to disclose that the renovations involved a full-scale electrical upgrade. Defendants retained Defendant AAG Services, Inc. as subcontractor to conduct the electrical work.  Plaintiff alleges Defendants failed to finalize permits for the electrical work, and that the work was substandard.  The Los Angeles Housing and Community Investment Department (“HCID”) later found that the electrical work violated the Los Angeles Municipal Code, resulting in a “lockout.” Plaintiff contends that remedying the electrical work is estimated to cost over $1 million, and the lost rent resulting from the lockout has been approximately $600,000. Plaintiffs brings causes of action against Drake Real Estate Group and Drake for (1) breach of management agreement, (2) negligence, and (4) negligent misrepresentation, and against AAG for (3) negligence.

Defendant Christopher Charles Drake now demurs to the Complaint.  Plaintiff opposed.

TENTATIVE RULING:

Defendant’s Demurrer to the Complaint is OVERRULED in it entirety.

Defendant is to file an Answer to the Complaint within 21 days of this ruling.

Plaintiff to give notice, unless waived.

DISCUSSION:

Demurrer

1. Meet and Confer

The Declaration of Attorney Christina Ho, Counsel for Defendant, reflects that the meet and confer requirement was satisfied. (CCP § 430.41.) 

2. Legal Standard

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.)

3. Analysis

A. Demurrer to Entire Complaint Based on Alter Ego Allegation

Defendant first contends that Plaintiff has failed to plead facts in support of its alter ego allegations. 

Plaintiff alleges that Defendant Drake Real Estate Group is an alter ego of Defendant Charles Drake, and throughout the Complaint, refers to the parties jointly as “Defendant.” (Compl. ¶ 4.) 

Alter ego allegations may be pled generally, and the principal factors for piercing the corporate veil—individual dominated the affairs of the corporation, unity of interest and ownership, corporation is a mere shell, diversion of income, inadequate capitalization, failure to issue stock and observe corporate formalities, adherence to fiction of separate corporate existence would work an injustice—may be alleged in conclusory terms. (First Western Bank & Trust Co. v. Bookasta (1968) 267 Cal.App.2d 910, 914-916.)

Therefore, for pleadings purposes, Plaintiff has alleged the existence of an alter-ego relationship. (See Fox v. JAMDAT Mobile, Inc., 185 Cal. App. 4th 1068, 1078 [“A demurrer accepts as true all well pleaded facts”].)

Accordingly, Defendant’s Demurrer to the Complaint is OVERRULED.

B. Demurrer to Fourth Cause of Action for Negligent Misrepresentation

Defendant also contends the Fourth Cause of Action [labeled “Third” in the Complaint] for Negligent Misrepresentation fails because it fails to allege the elements with sufficient particularity.

“The elements of negligent misrepresentation, a form of deceit, are [1] misrepresentation of a past or existing material fact, without reasonable ground for believing it to be true, and with intent to induce another's reliance on the fact misrepresented; [2] ignorance of the truth and justifiable reliance on the misrepresentation by the party to whom it was directed; and [3] resulting damage.  (Home Budget Loans, Inc. v. Jacoby & Meyers L. Offs. (1989) 207 Cal. App. 3d 1277, 1285.) “While there is some conflict in the case law discussing the precise degree of particularity required in the pleading of a claim for negligent misrepresentation, there is a consensus that the causal elements, particularly the allegations of reliance, must be specifically pleaded.”  (Nat'l Union Fire Ins. Co. of Pittsburgh, PA v. Cambridge Integrated Servs. Grp., Inc. (2009) 171 Cal. App. 4th 35, 50.)

Plaintiff alleges that Defendants Drake and Drake Real Estate Group jointly “represented that the interior renovations for vacant nine apartment units at Rowena-44 would be accomplished at a cost estimated to be approximately $300,000, with no provision for extensive building electrical upgrades.” (Compl. ¶ 53.) Defendant that also represented that “according to their extensive experience, renovating and upgrading apartments in Los Angeles would lead to higher rents and increased property values, which in turn would offset the costs to perform the upgrades.” (Id. ¶ 54.) Plaintiff contends these representations were false and that Defendant “had no reasonable grounds for believing the representations were true when it made them.” (Id. ¶¶ 55, 56.) Plaintiff then “reasonably relied on [Defendant’s] representations, and therefore authorized the renovation project to proceed according to the plan.” (Id. ¶ 58.) 

Moreover, by operation of the alter ego allegation, Plaintiff also attributes this conduct to Defendant Drake individually to the extent not already alleged against him.  (Id. ¶ 4.) Therefore, the pleading is sufficient to state a claim for negligent misrepresentation against the moving Defendant with all required elements.

Accordingly, Defendant’s Demurrer to the Fourth Cause of Action is OVERRULED.

Defendant is to file an Answer to the Complaint within 21 days of this ruling.

Plaintiff to give notice, unless waived.  

IT IS SO ORDERED.

Dated:   April 19, 2023 ___________________________________

Randolph M. Hammock

Judge of the Superior Court

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.