Judge: Randy Rhodes, Case: 19CHCV00958, Date: 2023-03-02 Tentative Ruling
Case Number: 19CHCV00958 Hearing Date: March 2, 2023 Dept: F51
Dept. F-51¿¿
Date: 3/2/23¿
Case #19CHCV00958
DEMURRER
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Demurrer Filed: 12/21/22¿
¿
MOVING PARTY: Defendants
Josh Hodeda, an individual; and Ingenious Asset Group, Inc., a California
corporation (collectively, “Defendants”)
RESPONDING PARTY: Plaintiff
Oak Grove Mobil home Park, LLC, a California limited liability company
(“Plaintiff”)
NOTICE: OK¿
¿
RELIEF REQUESTED: Defendants
demur to Plaintiff’s entire second amended complaint (“SAC”), in addition to
Plaintiff’s second, third, fourth, and fifth causes of action therein.
¿
TENTATIVE RULING: The demurrer is sustained as to
Plaintiff’s second cause of action, and overruled as to Plaintiff’s third,
fourth, and fifth causes of action. Plaintiff is granted 20 days leave to
amend. Plaintiff’s request for judicial notice is denied.
BACKGROUND¿
On 1/24/17,
the related action Boston Private & Trust Company v. Matthew R. Rogers,
et al. (Case No. PC057534) (the “Receivership Action”) was filed, alleging
causes of action for, among other things, appointment of receiver, judicial
foreclosure and breach of guaranty against Matthew R. Rogers and Sarah Rogers,
individually and as trustees of the Rogers Family Trust dated March 25, 2003
(“Rogers Trust”), Oakgrove Park, LLC (“Oakgrove”), and Robert Masino (“Masino”)
individually and as trustee of the Masino Family Trust dated June 22, 1977
(“Masino Trust”). The property that is the subject of the Receivership
Action is located at 12753 Sierra Highway, Santa Clarita, California 91390 (the
“Subject Property”).
On 2/23/18,
the Court appointed Josh Hodeda (the “Receiver” and a defendant in this action)
as the new receiver over the Subject Property in the Receivership Action, and
thereafter, operated the Property and collected rents. Soon after Hodeda’s
appointment as Receiver, the California Department of Housing and Community
Development (“CDHCD”) notified the Receiver that the Property’s Permit to Operate
(“PTO”) was suspended for a “faulty, unsafe and unsanitary” septic system. (SAC
¶ 9.) The Receiver replaced portions, but the work was done without
permits, and the Receiver was informed that the work did not resolve the issues
and would not result in reinstatement of the PTO. (Id. at ¶ 11.)
On 9/13/18,
the Receiver and Sonny Rouel (Plaintiff Oak Grove Mobil Home Park, LLC’s
(“Plaintiff”) assignor) (“Rouel”) entered into a purchase and sale agreement
for the Property (“PSA”). (Id. at ¶¶ 12.) On 11/16/18, pursuant to
the Receiver’s ex parte application, the Court approved the sale pursuant to
the terms of the PSA. Rouel, Plaintiff’s manager, assigned his rights under the
PSA to Plaintiff. (Id. at ¶ 14). In December 2018, the septic
system was still leaking prior to the close of escrow, and the Receiver, on the
one hand, and Plaintiff and Rouel, on the other, entered into a Repair and
Indemnity Agreement (“Side Agreement”). (Id. at ¶ 16–17.)
Plaintiff
alleges that in the Side Agreement, the Receiver agreed to repair the septic
system and further agreed to waive the “as-is” provision and the release
contained in the approved PSA with respect thereto. (Id. at ¶ 19.E.) The
Side Agreement states that “Seller shall be solely responsible for all costs
and expenses related to or associated with the Repair.” (Id. at ¶
20.) It also states that Seller “will maintain sufficient funds following the
close of escrow to complete the Repair …” (Id. at ¶ 21.) Plaintiff does
not allege that the Receivership Court approved the Side Agreement. However,
escrow closed. (Id. at ¶ 23.)
Plaintiff
alleges that in February 2019, the CDHCD posted a notice that the PTO on the
Property was suspended; and that as a result, all residents were informed by
CDHCD that Plaintiff was not legally permitted to collect rent. (Id. at ¶
26.) Plaintiff alleges that as a result of the suspension, Plaintiff has not
collected rent of approximately $20,000 per month since February 2019. (Ibid.)
Plaintiff
further alleges that the Receiver took no action to make the repairs, and as a
result Plaintiff undertook to do so, and was informed by CDHCD that it needed
permitted plans. (Id. at ¶¶ 27–28.) Plaintiff alleges that it hired
engineers, obtained an approved plan, entered into a contract for the work, and
began the work, but is still without a PTO and still cannot collect rent. (Id.
at ¶ 29.) Plaintiff further alleges that it made a demand on the Receiver, and
the Receiver disclosed to Plaintiff for the first time that he had not withheld
sufficient funds from the sale of the Property to complete the repair. (Id.
at ¶ 30.)
On
11/21/19, in the Receivership Action, the Receiver filed a Notice of Motion and
Motion for Order: (1) Approving Receiver’s Final Accounting; (2) Approving
Receiver’s Fees and Expenses; (3) Approving Final Disbursement of Funds; (4)
Exonerating Receiver’s and Plaintiff’s Bonds; and (5) Discharging the Receiver
(the “Discharge Motion”), which discusses the septic matter and the Side
Agreement.
On 12/2/19,
Plaintiff filed the instant action (“Oak Grove Action”) alleging causes of
action for: (1) Breach of Contract; (2) Breach of Contract; (3) Promissory
Fraud; (4) Fraud; (5) Negligent Misrepresentation; (6) Money Had and Received;
(7) Unjust Enrichment; and (8) Declaratory Relief. On 11/6/20, this instant
action and the Receivership Action were related.
On 5/19/21,
Plaintiff filed a first amended complaint (“FAC”), alleging the same causes of
action. On 12/6/21, the Court sustained nonmoving defendant Silicon Valley
Bank, as successor to Boston Private Bank & Trust Co.’s demurrer to the
FAC, with leave to amend.
On 1/11/22,
Plaintiff filed its SAC, alleging the same eight causes of action. On 12/21/22,
Defendants filed the instant demurrer without motion to strike. On 2/17/23,
Plaintiff filed its opposition and request for judicial notice. On 2/23/23,
Defendants filed their reply.
DEMURRER¿
Meet-and-Confer¿
Before
filing its demurrer, “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.” (Code Civ. Proc. §
430.41, subd. (a).) The demurring party must file and serve a meet and confer
declaration stating either: “(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;” or “(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.” (Id. at subd.
(a)(3).)
Here,
counsel for Defendants declares that he met and conferred with Plaintiff’s
attorney regarding the issues raised in the instant demurrer to Plaintiff’s SAC,
and the parties filed the 6/6/22 stipulation to continue the CMC date so that
Plaintiff would seek the Receivership Court’s permission to file the action.
(Decl. of Chad Wilcox, ¶ 7.) Therefore, counsel has satisfied the preliminary
meet and confer requirements of Code of Civil Procedure section 430.41,
subdivision (a).¿
¿
Analysis
As a
general matter, a¿party may respond to a pleading against it by demurrer on the
basis of any single or combination of eight enumerated grounds, including¿that
“the court has no jurisdiction of the subject of the cause of action alleged in
the pleading;”¿“the pleading does not state facts sufficient to constitute a
cause of action;” or the pleading is uncertain, meaning “ambiguous and
unintelligible.” (Code Civ. Proc., § 430.10, subds. (a), (e), and (f).)
In¿a
demurrer proceeding, the defects must be apparent on the face of the pleading
or via proper judicial notice.¿(Donabedian v. Mercury Ins. Co.¿(2004)
116 Cal.App.4th 968, 994.)¿“A demurrer tests the pleading alone, and not the
evidence or facts alleged.” (E-Fab, Inc.¿v.¿Accountants, Inc. Servs.¿(2007)
153 Cal.App.4th 1308, 1315.) As such, the court assumes the truth of the
complaint’s properly pleaded or implied factual allegations. (Ibid.) The
only issue a demurrer is concerned with is whether the complaint, as it stands,
states a cause of action. (Hahn v. Mirda¿(2007) 147 Cal.App.4th 740,
747.)¿
Here,
Defendants¿demur to Plaintiff’s entire SAC pursuant to Code of Civil Procedure
section 430.10, subdivision (a),¿arguing that the Court lacks jurisdiction over
the action because Plaintiff has failed to seek Court permission to file the
instant action against the Receiver. Defendants also demur to Plaintiff’s second,
third, fourth, and fifth causes of action in the SAC pursuant to Code of Civil
Procedure section 430.10, subdivisions (e) and (f),¿arguing that each cause of
action also fails because it (1) fails¿to allege facts sufficient to¿state¿a
cause of action against Moving Defendants;¿and (2) is uncertain.¿
A.
Lack of Jurisdiction
“A court will not entertain an
action to recover property in the possession of a defendant as receiver of
another court, unless leave to sue its receiver has been obtained from that
court, and the want of power in the federal court to entertain such a suit is
held to be jurisdictional.” (Isom v. Rex Crude Oil Co. (1905) 147 Cal.
663, 667). However, bringing an action against a receiver without consent of
the appointing court is not a matter of jurisdiction in the classical sense. (Ostrowski
v. Miller (1964) 226 Cal.App.2d 79, 82.)
Here, Defendants argue that the
claims against them “arise out of their position as a court-appointed receiver.
… In order to bring suit against the receiver, Plaintiff must seek court
permission of the receivership court.” (Dem. 8:3–6.) However, Plaintiff filed
the instant action without obtaining the requisite permission from the
Receivership Court.
Plaintiff offers several arguments
in opposition, including that it had no means to seek permission of the Court
before filing its Complaint because it is not a party to the Receivership
Action (Pl.’s Opp. 8:8–10.) However, as this Court stated in its 12/6/21 Order
sustaining a previous demurrer to Plaintiff’s FAC:
“Plaintiff’s claim that it could not
obtain permission from the Receivership Court before filing this action because
it is not a party to that action is unavailing. As noted above, Plaintiff
filed an opposition to the Receiver’s Discharge Motion in the Receivership
Action. Additionally, the PSA referred to the Receivership Action and
effectively made Plaintiff a party to that action. See Van
Loben Sels (1901) 131 Cal. 489, 492. Even if Plaintiff believed the
foregoing was insufficient to permit it to seek permission from the
Receivership Court to file this action, it could have moved the Receivership
Court to intervene in that action. See CCP 387.” (12/6/21 Minute
Order.)
Moreover,
as Defendants observe, the parties filed a stipulation with the Court on 6/6/22
explicitly stating that “Plaintiff's counsel has agreed to file a motion to
obtain authority to sue from the appointing court.” (6/6/22 Stip. to Continue
CMC.) As such, the Court finds that Plaintiff’s argument that it lacked the
means to seek permission to file the instant action lacks merit.
Plaintiff further
argues that Defendants waived their right to object to the SAC for lack of
consent by the Receivership Court. “The failure of a claimant to obtain court
permission to sue a receiver may justify a plea in abatement but it must be
raised by the receiver at the earliest opportunity, or it is waived. If waived,
a court will be rarely justified in permitting the defense to be made later.
The proper time to raise the plea of abatement is in the original answer or by
demurrer at the time of the answer. It is a technical objection and must be
pleaded specifically.” (55 Cal. Jur.3d Receivers § 76, citing Vitug v.
Griffin (1989) 214 Cal.App.3d 488.)
Plaintiff
argues that Defendants waived this right by appearing in and litigating the
action in various ways, including filing a cross-complaint, propounding
discovery to Plaintiff, and appearing for various conferences and hearings in
the instant action. (Pl.’s Opp., 9:12–10:2.) Defendants argue in reply that
such involvement with the litigation on their part was all in connection to efforts
to informally resolve the dispute, not to seek affirmative relief from Plaintiff.
(Defs.’ Reply, 3:1–13.) The Court agrees with Plaintiff, and finds Defendants’
argument unavailing. As Defendants have appeared in the action in various ways
over its course, the Court finds that Defendants have waived their objections
on the basis of lack of consent.
Accordingly,
the Court overrules the demurrer on the basis of lack of jurisdiction.
B.
Failure to State Facts to Constitute a Cause of
Action
1. Breach
of Contract
Plaintiff’s second cause of action alleges breach of
contract against Defendants as to the 9/13/18 PSA. To state this cause of action, a plaintiff must be able to
establish “(1) the existence of the contract, (2) plaintiff’s performance or
excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages
to the plaintiff.” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th
811, 821.) If a breach of contract claim “is based on 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 agreement must be attached and incorporated
by reference.” (Harris v. Rudin, Richman & Appel (1999) 74
Cal.App.4th 299, 307.)
Here, the parties do not dispute that a
valid, binding written contract existed between Plaintiff and Defendants. The subject
agreement is attached to the SAC as Exhibit A and incorporated by reference. (SAC ¶ 12.) The SAC
also alleges that “Plaintiff
has fully performed all the conditions, covenants, actions and promises under
the Repair and Indemnity Agreement except for any conditions, covenants,
actions or promises.” (Id. at ¶ 38 [emphasis added].) The
Court notes that this paragraph references the Repair and Indemnity Agreement,
while the second cause of action alleges a breach of the PSA, which is a
separate agreement. The emphasized language also seems to contradict the
remaining portions of the paragraph. Accordingly, the Court finds that
Plaintiff has not sufficiently pled its own performance of the PSA, or excuse
for nonperformance.
Plaintiff alleges that Defendants breached
the PSA by “failing concealing material information about the
Property, including but not limited to: (a) That the septic system repairs
performed by Hodeda and Ingenious in July 2018 were done without permits; (b)
That the PTO was suspended as a result of the defective condition of the
Property septic system.” (Id. at ¶ 39.) However, the Court notes that Plaintiff
has not referenced any contractual provision of the PSA that Defendants
allegedly breached.
Defendants demur
to this cause of action by asserting that “Plaintiff had
knowledge of the alleged misrepresentations and therefore could not have
justifiably relied on them to its detriment.” (Dem. 9:4–5.) Plaintiff argues in
opposition that while it had knowledge that the PTO was suspended, it was
misled by Defendants to believing the suspension was caused by nonpayment rather
than the unsafe condition created by the septic system. (Pl.’s Opp. 14:13–16.)
The Court declines to reach this issue as it pertains to Plaintiff’s second
cause of action, given its above finding that Plaintiff has not sufficiently
pled its own performance nor which contractual obligations Defendants allegedly
breached.
Accordingly,
the Court finds that Plaintiff has not alleged facts sufficient to support a
cause of action for breach of the PSA.
2. Promissory
Fraud
Plaintiff’s
third cause of action alleges promissory fraud/false promise against
Defendants. “The elements of promissory fraud ... are: (1) a promise made
regarding a material fact without any intention of performing it; (2) the
existence of the intent not to perform at the time the promise was made; (3)
intent to deceive or induce the promisee to enter into a transaction; (4)
reasonable reliance by the promisee; (5) nonperformance by the party making the
promise; and (6) resulting damage to the promise[e]. … As with any other form
of fraud, each element of a promissory fraud claim must be alleged with
particularity.” (Rossberg v. Bank of America, N.A. (2013) 219
Cal.App.4th 1481, 1498.)
Defendants
argue that Plaintiff has not sufficiently pled this cause of action with the
requisite degree of particularity, and “the Complaint only makes general
allegations based on speculation, which is insufficient to state this cause of
action.” (Dem. 9:20–21.) The Court disagrees.
In its SAC,
Plaintiff alleges that “Defendants entered into the Repair and Indemnity
Agreement in order to cause Plaintiff to close escrow and complete the sale of
the Property. Defendants never intended to perform the obligations of the
Repair and Indemnity Agreement. That is evidence [sic] in part by the fact that
Hodeda and Ingenious took no steps to (1) retain qualified contractors; (2)
perform required percolation tests; or (3) obtain a permit for the repairs. … Additionally,
Defendants were aware that the performance under the Repair and Indemnity
Agreement could not be completed under the time provided by the Repair and
Indemnity Agreement. As a result, Defendants knew they could not perform at the
time they entered into the agreement.” (SAC ¶¶ 42–43.) The remaining elements
of this cause of action are each pled in paragraphs 44 through 47 of the SAC.
Defendants
assert that the allegation that they “took no steps to (1) retain qualified
contractors; (2) perform required percolation tests; or (3) obtain a permit for
the repairs” after signing the agreement cannot show the existence of their
intent not to perform at the time the promise was made. (Dem. 9:28–10:3.) However,
as Plaintiff argues in reply, “the intention not to perform a promise is a
matter of inference from the facts proven and subsequent conduct may be
sufficient to show such intention.” (Pl.’s Opp., 12:18–20, quoting Wilkenson
v. Linnecke (1967) 251 Cal.App.2d 291, 293.)
Accordingly,
the Court finds that Plaintiff has sufficiently alleged facts to support a
cause of action for promissory fraud/false promise.
3. Fraud
Plaintiff’s fourth cause of action alleges fraud against
Defendants. “One who willfully deceives another with intent to induce him to
alter his position to his injury or risk, is liable for any damage which he
thereby suffers.” (Civ. Code § 1709.) Such deceit includes “a promise, made
without any intention of performing it.” (Civ. Code § 1710.) The elements that
must be pleaded in a cause of action for fraud are: (1) a misrepresentation
(false representation, concealment or nondisclosure); (2) knowledge of its
falsity (or “scienter”); (3) intent to defraud (i.e., to induce reliance); (4)
justifiable reliance; and (5) resulting damage. (Philipson & Simon v.
Gulsvig (2007) 154 Cal.App.4th 347, 363.)
Fairness requires that allegations of fraud be pled “with
particularity” so that the court can weed out nonmeritorious actions before a defendant is required to answer. (Small
v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184.) The particularity
requirement necessitates pleading facts that “show how, when, where, to whom,
and by what means the representations were tendered.” (Lazar v. Superior
Court (1996) 12 Cal.4th 631, 645.) Defendants argue that this cause of
action, along with Plaintiff’s fifth cause of action for Negligent
Misrepresentation below, have not been pled with the requisite degree of
particularity.
However, Plaintiff alleges in its SAC that Defendants
falsely represented to Plaintiff that the septic system repairs were performed
properly, without the need for permits, and that the PTO was not renewed due to
nonpayment, all while Defendants allegedly knew these representations were
false. (SAC ¶¶ 50–53.) Plaintiff further alleges that Defendants intended for
Plaintiff to rely on their false representations, that Plaintiff did in fact
justifiably rely, and thereby suffered damages of approximately $300,000. (Id.
at ¶¶ 54–55.)
Defendants
further argue that “Plaintiff had actual knowledge of the allegedly concealed
facts and it even negotiated a resolution of these issues which is memorialized
in the RIA. As such, Plaintiff cannot establish the elements of lack of
knowledge or justifiable reliance.” (Dem. 11:16–18.) As mentioned above,
Plaintiff argues in opposition that “contrary to Defendants’ argument,
Plaintiff did not know the status of the PTO because Hodeda falsely stated that
it was suspended only because of nonpayment. The truth is that it was suspended
because it was of the ‘unsafe and unsanitary condition of the septic system.’”
(Pl.’s Opp. 14:13–16.) Based on the foregoing, the Court finds that Plaintiff’s
has sufficiently pled justifiable reliance, along with each of the remaining
elements of fraud.
Accordingly,
the Court finds that Plaintiff has alleged facts sufficient to support its
fourth cause of action against Defendants for fraud.
4. Negligent
Misrepresentation
“California
courts have recognized a cause of action for negligent misrepresentation, i.e.,
a duty to communicate accurate information, in two circumstances. The first
situation arises where providing false information poses a risk of and results
in physical harm to person or property. The second situation arises where
information is conveyed in a commercial setting for a business purpose.” (Friedman v. Merck & Co. (2003) 107
Cal.App.4th 454, 477.)
As
with Plaintiff’s fourth cause of action for fraud, here, Plaintiff has
similarly pled the elements of negligent misrepresentation in alleging the
misrepresentations of fact, Defendants’ intent to induce Plaintiff’s reliance,
Plaintiff’s justifiable reliance on the alleged misrepresentations, and
resulting damages. (SAC ¶¶ 58–62.)
As Defendants combined their
arguments against Plaintiff’s fourth and fifth causes of action for Fraud and Negligent
Misrepresentation, the Court incorporates its above analysis concerning
Plaintiff’s Fraud cause of action in its analysis on the negligent
misrepresentation cause of action. Accordingly, the Court finds that Plaintiff
has alleged facts sufficient to support its fifth cause of action against
Defendants for negligent misrepresentation.
Accordingly, the demurrer is sustained as
to Plaintiff’s second cause of action for failure to state facts sufficient to
constitute a cause of action, and overruled as to Plaintiff’s third, fourth,
and fifth causes of action.
C.
Uncertainty
Generally speaking, “demurrers for uncertainty are
disfavored and thus are strictly construed because ambiguities can reasonably
be clarified under modern rules of discovery. Such demurrers are granted only
if the pleading is so incomprehensible that defendant cannot reasonably
respond.” (Cal.Jur.3d § 137.) “Where the complaint contains substantive factual
allegations sufficiently apprising defendant of the issues it is being asked to
meet, a demurrer for uncertainty should be overruled or plaintiff given leave
to amend.” (Williams v. Beechnut Nutrition Corp. (2011) 185 Cal.App.3d
135, 139 fn.2.)¿¿
Here, Defendants argue that Plaintiff’s second, third, fourth, and fifth causes of action in the SAC are uncertain pursuant to Code
of Civil Procedure section 430.10, subdivision (f). In applying the stringent
standard for demurrers filed on this ground, the Court finds that the SAC is
not “so incomprehensible” that Defendants cannot respond, especially given the
extensive analyses they have offered in attacking the pleading in their
demurrer and reply papers. Accordingly, the demurrer is overruled on this
ground.
LEAVE TO AMEND¿
Where a
demurrer is sustained, leave to amend must be allowed where there is a
reasonable possibility of successful amendment. (Goodman v. Kennedy
(1976) 18 Cal.3d 335, 348.) The burden is on the plaintiff to show the court
that a pleading can be amended successfully. (Id.; Lewis v. YouTube, LLC
(2015) 244 Cal.App.4th 118, 226.) However, “[i]f there is any reasonable
possibility that the plaintiff can state a good cause of action, it is error to
sustain a demurrer without leave to amend.” (Youngman v. Nevada Irrigation
Dist. (1969) 70 Cal.2d 240, 245).¿
Here, the
Court notes that this is the second demurrer heard in this action, and that
Plaintiff has had a previous opportunities to amend its complaint to cure the
pleading deficiencies. However, pursuant the Court’s liberal policy of granting
leave to amend, the Court grants Plaintiff 20 days leave to amend the complaint
to cure the defects set forth above.¿
CONCLUSION¿
The demurrer is sustained as to
Plaintiff’s second cause of action for failure to state facts sufficient to
constitute a cause of action, and overruled as to Plaintiff’s third, fourth,
and fifth causes of action. Plaintiff is granted 20 days leave to amend. Plaintiff’s
request for judicial notice is denied.