DEMURRER TO COMPLAINT

 

MOVING PARTY: Defendant Otiima USA

RESPONDING PARTY(S): Plaintiff C.G.S. Custom Glass Specialists

STATEMENT OF MATERIAL FACTS AND/OR PROCEEDINGS:

Plaintiff C.G.S. Custom Glass Specialists, a window and glass dealer, brings this action against Defendant Ottima USA, a manufacturer. While working with a third party to make a deal on materials for a project in Beverly Hills, Plaintiff alleges that Defendant presented Plaintiff the with an offer to step away from the deal in exchange for a $200,000 credit or commission. Plaintiff accepted the offer but has not received the payment. Plaintiff accordingly asserts causes of action against Defendant for (1) breach of contract, (2) negligent misrepresentation, (3) fraudulent inducement, (4) false promise, and (5) promissory estoppel. 

Defendant now demurrers to the Complaint. Plaintiff opposed.

TENTATIVE RULING:

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

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

Plaintiff is ordered to give notice, unless waived. 

DISCUSSION:

Demurrer

I. Meet and Confer

The Declaration of Derek K. Ulmer, Counsel for Defendant, reflects that the meet and confer requirement was met.

II. 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.)  

III. Analysis

Defendant demurrers to each cause of action in the Complaint.  Each is addressed in turn.

A. First Cause of Action for Breach of Contract

First, Defendant demurrers to the Breach of Contract cause of action. To establish a breach of contract, Plaintiff must allege: (1) the existence of contract; (2) Plaintiff’s performance or excuse for nonperformance; (3) Defendant’s breach (or anticipatory breach); and (4) resulting damage.  (Wall Street Network, Ltd. v. N. Y. Times Co. (2008) 164 Cal.App.4th 1171, 1178.) Defendant argues Plaintiff has not alleged the existence of a valid contract.

The rule in California is that “[a] written contract may be pleaded either by its terms—set out verbatim in the complaint or a copy of the contract attached to the complaint and incorporated therein by reference—or by its legal effect. [Citation.] In order to plead a contract by its legal effect, plaintiff must ‘allege the substance of its relevant terms. This is more difficult, for it requires a careful analysis of the instrument, comprehensiveness in statement, and avoidance of legal conclusions.’ [Citation.]”  (Heritage Pac. Fin., LLC v. Monroy, (2013) 215 Cal. App. 4th 972, 993.)

As alleged in the Complaint, Defendant is a window and door manufacturer. (Compl. ¶ 5.) Plaintiff is “in the business of the installation of custom glass for residential and business properties” and was a dealer of Defendant’s windows. (Id. ¶¶ 3, 6.) In July 2021, Tom Van Lokeren and Van Lokeren Constrution approached Plaintiff about installing glass and building materials for a project in Beverly Hills. (Id. ¶ 12.) “Tom Yang, on behalf of CGS, negotiated the pricing for the building materials with Ed Kanney, Sales Manager, of Otiima. However, CGS and Otiima had some difficulty coming up with an agreed upon wholesale price for the building materials that was acceptable to CGS, Otiima and Van Lokeren Construction.” (Id. ¶ 13.)

As a result, Van Lokeren attempted to cut out the middleman (Plaintiff) and buy the materials direct from Defendant. (Id. ¶ 15.) Not wanting to damage its relationship with Plaintiff, Defendant presented Plaintiff with a compromise:  “[I]n exchange for a $200,000.00 commission,” Plaintiff would “step aside and allow Otiima to deal directly with Van Lokeren Construction.” (Id. ¶ 17.) Plaintiff eventually accepted this offer. (Id.) 

In the following months, Plaintiff attempted to recover its $200,000 “commission” or credit from Defendant. Plaintiffs attempts to recover that amount of been unsuccessful, and Defendant has cut ties with Plaintiff. (Id. ¶ 21.) Plaintiff now asserts causes of action against Defendant for (1) breach of contract, (2) negligence misrepresentation, (3) fraudulent inducement, (4) false promise, and (5) promissory estoppel.

Here, Plaintiff alleges the contract is “evidenced by” the email exchange attached to the Complaint. (See id. ¶ 22; see also Notice of Errata.) The exchange is summarized below. 

Specifically, during the negotiation period, Ed Kanney of Defendant emailed Tom Yang of Plaintiff. (See Compl. Notice of Errata, Exh. 3.) Kanney stated he was “trying to make this [deal] work for everyone” and presented Yang with two “options.” (Id.) As relevant here, the second option was that Defendant would “provide [Plaintiff] with a $200K commission and give [Defendant] [its] blessing to sell this one directly.” (Id.) In other words, Plaintiff would “step out of” the deal completely and let Defendant “run with it.” (Id.) 

There is no direct indication that Plaintiff responded by email to accept that offer. However, the next day, Defendant informed Van Lokeren by email that Plaintiff had “agreed that it’s best for Otiima to work directly with you on this project,” i.e., that Plaintiff had accepted the second option to step aside in exchange for a $200,000 commission. (Id., Exh. 4.) Moreover, on October 15, 2021, Kanney emailed the other owners of Defendant and confirmed that the Beverly Hills project was “locked down as a direct sale” to Van Lokeren and that “[Plaintiff] agreed to step aside on this project and chose option #2.” (Id., Exh. 5.) Kanney wrote that he already “verbally informed [the email recipients] of Tom's decision, but [he] wanted to put this in writing now that we're moving forward.” (Id.) 

Considering the emails and allegations, there can be little doubt that Defendant (through its agent, Ed Kanney), presented Plaintiff with an offer to step away from the project in exchange for a $200,000 commission or credit. This offer was “sufficiently definite” and evinced a willingness to contract—it was not just a preliminary negotiation. (Ladas v. California State Automobile Assn. (1993) 19 Cal.App.4th 761, 770.)

As to acceptance, Kanney himself confirmed in emails to Van Lokeren and within Otiima that Plaintiff accepted that offer. This demonstrates that Plaintiff “expressed or communicated” its acceptance to Defendant, even though it might not have done so in writing.  (Russell v. Union Oil Co. (1970) 7 Cal.App.3d 110, 114.) 

Finally, contrary to Defendant’s assertion, the fact that the parties referred to the payment as a “commission” at some points and a “credit” at others does not evince a lack of mutual assent. Rather, the legal effect of the contract was clear: Plaintiff would step aside from the project and forego any commission it might be entitled to in exchange for $200,000. Therefore, Plaintiff has alleged all elements of its cause of action for breach of contract, including the existence of a contract.

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

B. Demurrer to Fifth Cause of Action for Promissory Estoppel

Next, Defendant demurrers to the Fifth Cause of Action for promissory estoppel, arguing that “it is unclear whether a promise was made, and if one was, the terms remain unclear and ambiguous.” (Opp. 6: 6-7.) The court disagrees.

“The elements of a promissory estoppel claim are ‘(1) a promise clear and unambiguous in its terms; (2) reliance by the party to whom the promise is made; (3) [the] reliance must be both reasonable and foreseeable; and (4) the party asserting the estoppel must be injured by his reliance.’ [Citation.]”  (Jones v. Wachovia Bank (2014) 230 Cal. App. 4th 935, 945.) As explained in Granadino v. Wells Fargo Bank (2015) 236 Cal.App. 4th 411, 417, “[a] promise is an indispensable element of the doctrine of promissory estoppel. The cases are uniform in holding that this doctrine cannot be invoked and must be held inapplicable in the absence of a showing that a promise had been made upon which the complaining party relied to his prejudice ...’ [Citation.] The promise must, in addition, be ‘clear and unambiguous in its terms.’ [Citation.] ‘Estoppel cannot be established from ... preliminary discussions and negotiations.’ ”  (236 Cal. App. 4th at 417;  accord Garcia v. World Sav., FSB (2010) 183 Cal. App. 4th 1031, 1045.)

C. Demurrer to Second, Third, and Fourth Causes of Action

Finally, Defendant argues the Second (Negligent Misrepresentation), Third (Fraudulent Inducement), and Fourth (False Promise) causes of action fail because there is no valid contract. But as discussed supra, the court rejects that contention.

Defendant then argues that even if there was an agreement between the parties, “Defendant’s representations to Plaintiff were always honest and reasonable.” (Dem. 6: 22-23.)  But in doing so, it attempts to argue the facts. Whether Defendant’s representations were honest and reasonable presents a question of fact that cannot be resolved on this demurrer. 

Accordingly, Defendant’s Demurrer to the Second, Third, and Fourth Causes of Action is OVERRULED.

IT IS SO ORDERED.

Dated:   January 8, 2025 ___________________________________