Judge Richard Y. Lee, Case 30-2022-01242363 2022-12-01 Tentative Ruling

Judge: Richard Y. Lee, Case: 30-2022-01242363, Date: 2022-12-01 Tentative Ruling

The Real Estate Consultants Demurrer and Motion to Strike

Defendants The Real Estate Consultants, Inc. dba T.N.G. Real Estate and Grace Pak (“Defendants”) filed a Demurrer to the third cause of action for constructive fraud and fourth cause of action for breach of Civil Code section 1102.3, 1102.6, and 1102.13 in the First Amended Complaint (“FAC”) on the grounds that the facts are insufficient to constitute a cause of action. Defendants also filed a Motion to Strike portions of the Frist Amended Complaint related to punitive damages and attorney’s fees.

DEMURRER

Third Cause of Action for Constructive Fraud

“The elements of the cause of action for constructive fraud are: (1) fiduciary relationship; (2) nondisclosure (breach of fiduciary duty); (3) intent to deceive, and (4) reliance and resulting injury (causation).” (Younan v. Equifax Inc. (1980) 111 Cal.App.3d 498, 517, fn. 14.)

“Constructive fraud ‘arises on a breach of duty by one in a confidential or fiduciary relationship to another which induces justifiable reliance by the latter to his prejudice.’” (Prakashpalan v. Engstrom, Lipscomb & Lack (2014) 223 Cal.App.4th 1105, 1131, as modified on denial of reh’g (Feb. 27, 2014) “Actual reliance and causation of injury must be shown.”

“Actual reliance occurs when a misrepresentation is an immediate cause of a plaintiff’s conduct, which alters his legal relations, and when, absent such representation, he would not, in all reasonable probability, have entered into the contract or other transaction.” (Conroy v. Regents of University of California (2009) 45 Cal.4th 1244, 1256 [citations omitted].) “Besides actual reliance, [a] plaintiff must also show ‘justifiable’ reliance, i.e., circumstances were such to make it reasonable for [the] plaintiff to accept [the] defendant’s statements without an independent inquiry or investigation.’” (Public Employees’ Retirement System v. Moody’s Investors Service, Inc. (2014) 226 Cal.App.4th 643, 672 [emphasis in original].) “The reasonableness of the plaintiff’s reliance is judged by reference to the plaintiff’s knowledge and experience.” (Ibid.)

As stated in Michel v. Moore & Associates, Inc. (2007) 156 Cal.App.4th 756, 762–763:

“a real estate agent, as a fiduciary, is ... liable to his principal for constructive fraud even though his conduct is not actually fraudulent. Constructive fraud is a unique species of fraud applicable only to a fiduciary or confidential relationship. As a general principle constructive fraud comprises any act, omission or concealment involving a breach of legal or equitable duty, trust or confidence which results in damage to another even though the conduct is not otherwise fraudulent. Most acts by an agent in breach of his fiduciary duties constitute constructive fraud. The failure of the fiduciary to disclose a material fact to his principal which might affect the fiduciary’s motives or the principal’s decision, which is known (or should be known) to the fiduciary, may constitute constructive fraud.” (Ibid. [citations omitted].)

Here, Plaintiffs properly allege that Defendants were in a fiduciary relationship with Plaintiffs and they breached their duty to disclose that the foundation and other structural support for the Property were poorly designed, were in disrepair, and needed to be replaced. While Plaintiffs allege that they relied on Defendants’ failure to disclose these facts and were injured as a result, Plaintiffs fail to allege that they “would not have acted as they did if they had known of the concealed or suppressed fact” or that their reliance was justified.

As such, the Demurrer to the third cause of action for constructive fraud is SUSTAINED WITH 20 DAYS’ LEAVE TO AMEND.

Fourth Cause of Action for Breach of Civil Code Sections 1102.3, 1102.6, and 1102.13

Plaintiffs do not oppose Defendants’ arguments regarding the fourth cause of action for breach of Civil Code sections 1102.3, 1102.6, and 1102.13. (ROA # 93, p. 5, fn. 1.) Plaintiffs’ failure to oppose these arguments may be treated as an abandonment of the claims to which the moving party objected. (Herzberg v. County of Plumas (2005) 133 Cal.App.4th 1, 20.) Accordingly, the court construes Plaintiffs’ failure to oppose the Demurrer to the fourth cause of action against Defendants The Real Estate Consultants, Inc. dba T.N.G. Real Estate and Grace Pak as an abandonment of any opposition to the issues raised in the moving and demurring papers. (Herzberg v. County of Plumas (2005) 133 Cal.App.4th 1, 20.)

As such, the Demurrer to the fourth cause of action in the First Amended Complaint for breach of Civil Code sections 1102.3, 1102.6, and 1102.13 against Defendants The Real Estate Consultants, Inc. dba T.N.G. Real Estate and Grace Pak is SUSTAINED WITHOUT LEAVE TO AMEND.

MOTION TO STRIKE

Defendants The Real Estate Consultants, Inc. dba T.N.G. Real Estate and Grace Pak moved to strike the following allegations regarding punitive damages and attorney’s fees:

• Prayer, Paragraph 3, at line 25.

• Prayer, Paragraph 4, at line 26.

• Prayer, Paragraph 2, at line 24.

Plaintiffs did not file an opposition to the Motion to Strike. Plaintiffs’ failure to oppose these arguments may be treated as an abandonment of the claims to which the moving party objected. (Herzberg v. County of Plumas (2005) 133 Cal.App.4th 1, 20.) Accordingly, the court construes Plaintiffs’ failure to oppose the Motion to Strike as an abandonment of any opposition to the issues raised in the moving and demurring papers. (Herzberg v. County of Plumas (2005) 133 Cal.App.4th 1, 20.)

As such, the Motion to Strike is GRANTED WITHOUT LEAVE TO AMEND.

Moving parties to give notice.

Riphagen & Bullerdick Demurrer and Motion to Strike

Defendants Riphagen & Bullerdick, Inc. dba Re/Max Tiffany Real Estate and Darryl Chrispen filed a Demurrer to the first cause of action for fraud, second cause of action for negligent misrepresentation, third cause of action for constructive fraud, and fourth cause of action for breach of Civil Code section 1102.3, 1102.6, and 1102.13 in the First Amended Complaint (“FAC”). Defendants also filed a Motion to Strike portions of the Frist Amended Complaint related to punitive damages and attorney’s fees.

DEMURRER

First Cause of Action for Fraud

The elements of fraud, which give rise to the tort action for deceit, are (1) misrepresentation (false representation, concealment or non-disclosure); (2) knowledge of falsity (or “scienter”); (3) intent to defraud, i.e., to induce reliance; (4) justifiable reliance; and (5) resulting damage. (Hackethal v. National Casualty Co. (1987) 189 Cal.App.3d 1102, 1110.)

The elements of an action for fraud and deceit based on concealment are: (1) the defendant must have concealed or suppressed a material fact, (2) the defendant must have been under a duty to disclose the fact to the plaintiff, (3) the defendant must have intentionally concealed or suppressed the fact with the intent to defraud the plaintiff, (4) the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact, and (5) as a result of the concealment or suppression of the fact, the plaintiff must have sustained damage. (Boschma v. Home Loan Center, Inc. (2011) 198 Cal.App.4th 230, 248.)

Further, fraud must be pleaded with particularity rather than with “general and conclusory” allegations. (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184.) This heightened pleading requirement also applies to fraudulent concealment (Boschma v. Home Loan Center, Inc. (2011) 198 Cal.App.4th 230, 248), and requires allegations showing how, when, where, to whom, and by what means the representations or omissions were made. (Cansino v. Bank of America (2014) 224 Cal.App.4th 1462, 1469.) When fraud is alleged against a corporation, plaintiff must allege the identities of the persons who made the representations, their authority to speak, to whom they spoke, what they said or wrote and when it was said or written. (Id.) Less specificity is required when it appears from the nature of the allegations that Defendant “necessarily possess full information” concerning the facts of the controversy. (Id.)

Here, Plaintiff alleges that Defendants Riphagen & Bullerdick, Inc. dba Re/Max Tiffany Real Estate and Darryl Chrispen discovered that the foundation of the Property needed major repairs or to be replaced with a new foundation. (FAC, ¶ 39.) Defendants further discovered that the foundation was not even and flat but rather unbalanced and slanted. (FAC, ¶ 39.)

Defendants knew that they were obligated to disclose this information to Plaintiffs but deliberately chose to conceal this fact from Plaintiffs. (FAC, ¶ 39.) The false information about the condition of foundation was included in the Seller Property Questionnaire and Real Estate Transfer Disclosure Statement even though Defendants knew these states were false. (FAC, ¶¶ 40-43.) Defendants knowingly, intentionally, and willfully relayed this false information to Plaintiffs on March 29, 2021 and concealed that the foundation of the Property was in disrepair and would have to be replaced. (FAC, ¶¶ 43-44.)

Defendants intended that Plaintiffs rely on the misrepresented facts regarding the condition of the property and Plaintiffs did rely on those representations in purchasing the property. (FAC, ¶¶ 43-44.) Plaintiffs were injured as a result of the misrepresentations and concealment. (FAC, ¶ 47.)

Importantly, however, Plaintiffs have not alleged that they “would not have acted as they did if they had known of the concealed or suppressed fact” or that their reliance was justified. “Actual reliance occurs when a misrepresentation is an immediate cause of a plaintiff’s conduct, which alters his legal relations, and when, absent such representation, he would not, in all reasonable probability, have entered into the contract or other transaction.” (Conroy v. Regents of University of California (2009) 45 Cal.4th 1244, 1256 [citations omitted].) “Besides actual reliance, [a] plaintiff must also show ‘justifiable’ reliance, i.e., circumstances were such to make it reasonable for [the] plaintiff to accept [the] defendant’s statements without an independent inquiry or investigation.’” (Public Employees’ Retirement System v. Moody’s Investors Service, Inc. (2014) 226 Cal.App.4th 643, 672 [emphasis in original].) “The reasonableness of the plaintiff’s reliance is judged by reference to the plaintiff’s knowledge and experience.” (Ibid.)

As such, Plaintiffs do not state facts sufficient to constitute a fraud cause of action. The Demurrer is SUSTAINED WITH 20 DAYS LEAVE TO AMEND as to the first cause of action for fraud.

Second Cause of Action for Negligent Misrepresentation

The elements of a negligent misrepresentation cause of action are the same as the ones for fraud except there is no requirement of intent to induce reliance. (Cadlo v. Owens-Illinois, Inc. (2005) 125 Cal.App.4th 513, 519.) Like fraud, negligent misrepresentation must be specifically pled. (Id.)

Negligent misrepresentation is a separate and distinct tort, a species of the tort of deceit. “Where the defendant makes false statements, honestly believing that they are true, but without reasonable ground for such belief, he may be liable for negligent misrepresentation, a form of deceit.” (Bily v. Arthur Young & Co. (1992) 3 Cal.4th 370, 407.)

“Negligent misrepresentation requires an assertion of fact, falsity of that assertion, and the tortfeasor’s lack of reasonable grounds for believing the assertion to be true.” (SI 59 LLC v. Variel Warner Ventures, LLC (2018) 29 Cal.App.5th 146, 154; CACI 1903.) “It also requires the tortfeasor’s intent to induce reliance, justifiable reliance by the person to whom the false assertion of fact was made, and damages to that person.” (Ibid.) “An implied assertion of fact is ‘not enough’ to support liability.” (Ibid.)

Here, the second cause of action for negligent misrepresentation is SUSTAINED WITH 20 DAYS LEAVE TO AMEND for the reason discussed under the fraud cause of action analysis above.

Third Cause of Action for Constructive Fraud and Fourth Cause of Action for Breach of Civil Code Sections 1102.3, 1102.6, and 1102.13

Plaintiffs do not oppose Defendants’ arguments regarding the third cause of action for constructive fraud and fourth cause of action for breach of Civil Code sections 1102.3, 1102.6, and 1102.13. (ROA # 95, p. 6, fn. 1.) Plaintiffs’ failure to oppose these arguments may be treated as an abandonment of the claims to which the moving party objected. (Herzberg v. County of Plumas (2005) 133 Cal.App.4th 1, 20.) Accordingly, the court construes Plaintiffs’ failure to oppose the Demurrer to the third and fourth causes of action against Defendants The Real Estate Consultants, Inc. dba T.N.G. Real Estate and Grace Pak as an abandonment of any opposition to the issues raised in the moving and demurring papers. (Herzberg v. County of Plumas (2005) 133 Cal.App.4th 1, 20.)

As such, the Demurrer to the third cause of action for constructive trust and fourth cause of action in the First Amended Complaint for breach of Civil Code sections 1102.3, 1102.6, and 1102.13 against Defendants Riphagen & Bullerdick, Inc. dba Re/Max Tiffany Real Estate and Darryl Chrispen are SUSTAINED WITHOUT LEAVE TO AMEND.

MOTION TO STRIKE

Defendants Riphagen & Bullerdick, Inc. dba Re/Max Tiffany Real Estate and Darryl Chrispen moved to strike the following allegations regarding punitive damages and attorney’s fees:

• Page 6:1-2, where it states: “Defendants acted with malice, oppression, or fraud, and therefore, Plaintiffs are entitled to punitive damages as against Defendants.”

• Prayer for Relief, Page 9, line 25, where it states: “For punitive and exemplary damages.”

• Prayer for Relief, Page 9: line 26, where it states: “For attorneys’ fees and costs.”

As such, the Motion to Strike is GRANTED.

Moving parties to give notice.