Judge Robert B. Broadbelt, Case Number: 24STCV07935, Date: 2025-03-25 Tentative Ruling

Judge: Robert B. Broadbelt, Case: 24STCV07935, Date: 2025-03-25 Tentative Ruling

Tentative rulings are sometimes, but not always, posted. The purpose of posting a tentative ruling is to to help focus the argument. The posting of a tentative ruling is not an invitation for the filing of additional papers shortly before the hearing.

The court considered the moving, opposition, and reply papers filed in connection with the demurrer and motion to strike.

Plaintiffs Gary Bairos and Richard Bairos (“Plaintiffs”) filed this action against defendants Yoav Sarraf (“Sarraf”) and Concord Real Estate Services, Inc. (“Concord”) (collectively, “Defendants”) on March 29, 2024, alleging six causes of action for (1) negligent misrepresentation; (2) professional negligence; (3) breach of fiduciary duty; (4) aiding and abetting misrepresentation; (5) continuing concealment; and (6) unfair business practices.

Defendants now move the court for an order (1) sustaining their demurrer to each cause of action alleged in Plaintiffs’ Complaint, and (2) striking from the Complaint the requests for emotional distress damages and punitive damages.

The court overrules Defendants’ demurrer to the Complaint on the ground of uncertainty because it is not ambiguous or unintelligible and therefore is not uncertain. (Code Civ. Proc., § 430.10, subd. (f).)

The court overrules Defendants’ demurrer to the first cause of action for negligent misrepresentation because they have not shown that it does not state facts sufficient to constitute a cause of action since Plaintiffs have alleged (1) that Defendants “knew or should have known the ABC license was not valid for the sale of alcohol at the PREMISES; nor was the license owned by SELLER[,]” (2) that Plaintiffs met with “dual agent[,]” defendant Saraff, thereby alleging Defendants’ duty to inform Plaintiffs of any defects with the ABC license, and (3) facts establishing that Plaintiffs reasonably relied on those representations, i.e., because Saraff was acting as the dual agent in the sale. (Code Civ. Proc., § 430.10, subd. (e); Compl., ¶¶ 19 [internal emphasis omitted], 17 [emphasis added], 31; Borman v. Brown (2021) 59 Cal.App.5th 1048, 1060 [elements of negligent misrepresentation]; Assilzadeh v. California Federal Bank (2000) 82 Cal.App.4th 399, 414 [“a dual agent has fiduciary duties both to the buyer and seller”], 415 [“Breach of a real estate agent’s fiduciary duty to his or her client may constitute negligence or fraud depending on the circumstances of the case”].)

The court overrules Defendants’ demurrer to the second cause of action for professional negligence because it states facts sufficient to constitute a cause of action since Plaintiffs have sufficiently alleged that (1) Defendants owed a duty of care to Plaintiffs on the ground that they were acting as dual agents in the subject transaction, (2) Defendants breached their duty of care by withholding, misrepresenting, or concealing the deficient nature, or lack, of a valid ABC license, and (3) Plaintiffs were harmed by Defendants’ breaching their duty to Plaintiffs in this manner. (Code Civ. Proc., § 430.10, subd. (e); Compl., ¶¶ 16 [alleging dual agency], 32 [referencing actions described in paragraphs 16-31], 33-34, 41; Paul v. Patton (2015) 235 Cal.App.4th 1088, 1095 [elements of professional negligence].)

The court also notes that Defendants have argued that they were not required to investigate whether the ABC license was valid under Civil Code section 2079.3. The court acknowledges, as Defendants point out, that an inspection under that statute does not require “an affirmative inspection of . . . permits concerning the title or use of the property . . . .” (Civ. Code, § 2079.3.) But that statute does not establish that Defendants did not have a duty to not misrepresent or conceal facts material to a transaction, which is the breach of duty that Plaintiffs have alleged in connection with this cause of action.[1] (Compl., ¶ 34.)

The court overrules Defendants’ demurrer to the third cause of action for breach of fiduciary duty because it states facts sufficient to constitute a cause of action since Plaintiffs have sufficiently alleged (1) the existence of a fiduciary relationship between the parties based on the allegation that Defendants were acting as dual agents, (2) Defendants’ breach of their fiduciary duties to Plaintiffs, and (3) resulting damages.[2] (Code Civ. Proc., § 430.10, subd. (e); Compl., ¶¶ 44-50; Hodges v. County of Placer (2019) 41 Cal.App.5th 537, 546 [elements of breach of fiduciary duty]; Assilzadeh, supra, 82 Cal.App.4th at p. 414 [dual agents have fiduciary duties to both the seller and the buyer].)

The court overrules Defendants’ demurrer to the fourth cause of action for aiding and abetting misrepresentation because it states facts sufficient to constitute a cause of action since (1) Plaintiffs have alleged that Defendants “affirmed and vouched for [the seller’s] false statements about the purportedly valid status of the ABC license and about it being in possession of [the seller] and in good standing with California regulatory authorities[,]” which is sufficient (2) to allege facts establishing that Defendants aided and abetted the seller’s torts since the facts allege that (i) Defendants gave “substantial assistance to [the seller] in accomplishing a tortious result[,]” and (ii) Defendants separately breached a duty to Plaintiffs based on their fiduciary relationship. (Code Civ. Proc., § 430.10, subd. (e); Compl., ¶¶ 52, 55; American Master Lease LLC v. Idanta Partners, Ltd. (2014) 225 Cal.App.4th 1451, 1475 [liability may be imposed on one who aids and abets the commission of an intentional tort if the person “gives substantial assistance to the other in accomplishing a tortious result and the person’s own conduct, separately considered, constitutes a breach of duty to the third person”] [internal quotation marks and citation omitted].)

The court overrules Defendants’ demurrer to the fifth cause of action for continuing concealment because they have not shown that it does not state facts sufficient to constitute a cause of action for fraudulent concealment since Plaintiffs (1) have sufficiently alleged, in connection with the preceding causes of action, that Defendants knew of the falsity of the subject representations, and therefore (2) have sufficiently alleged that Defendants knew of the falsity of their “unrealistic reassurance to Plaintiffs” as alleged in the fifth cause of action.[3] (Code Civ. Proc., § 430.10, subd. (e); Compl., ¶¶ 55, 62.)

The court overrules Defendants’ demurrer to the sixth cause of action for unfair business practices because Defendants have not shown that it does not state facts sufficient to constitute a cause of action since (1) Defendants have argued only that this cause of action fails because “Plaintiffs have failed to state any cause of action against Defendants” and because it is based on one allegation, and (2) the court has overruled Defendants’ demurrer to the first through fifth causes of action.[4] (Code Civ. Proc., § 430.10, subd. (e).)

Defendants move to strike from Plaintiffs’ Complaint (1) the prayer for punitive damages (Compl., p. 3, ¶ 14, subd. (a)(2)), and (2) the allegations of emotional distress and request for damages based on Plaintiffs’ allegedly suffering emotional/psychological distress as a result of Defendants’ conduct (Compl., p. 3, ¶ 11, subd. (g); Compl., ¶ 41).

First, the court denies defendant Saraff’s motion to strike Plaintiffs’ prayer for punitive damages because Plaintiffs have alleged facts establishing that Saraff is guilty of fraud. (Code Civ. Proc., § 436; Civ. Code, § 3294, subd. (a).)

Second, the court grants defendant Concord’s motion to strike Plaintiffs’ prayer for punitive damages because Plaintiffs have not alleged facts establishing the advance knowledge and conscious disregard, authorization, ratification, or act of fraud on the part of an officer, director, or managing agent of Concord. (Code Civ. Proc., § 436; Civ. Code, § 3294, subd. (b).) Plaintiffs did not, for example, allege that Saraff is an officer, director, or managing agent of Concord.

Third, the court grants Defendants’ motion to strike the allegation that Plaintiffs suffered psychological distress in support of their cause of action for professional negligence because (1) Plaintiffs’ claim for negligence is based on the allegations that Defendants made negligent misrepresentations to Plaintiffs (Compl., ¶¶ 33-34), which resulted in the loss of Plaintiffs’ bar (Compl., ¶ 42), and (2) “a plaintiff cannot recover damages for emotional distress in an action for negligent misrepresentation where the ‘plaintiff’s direct loss resulting from the negligent conduct of the defendant was [only] economic[,]’” as alleged here. (Code Civ. Proc, § 436; Butler-Rupp v. Lourdeaux (2005) 134 Cal.App.4th 1220, 1227.) The court further finds that Plaintiffs have not pleaded facts establishing that “the negligence [alleged in their Complaint] is of a type which will cause highly unusual as well as predicable emotional distress,” so as to permit the recovery of emotional distress damages. (Butler-Rupp, supra, 134 Cal.App.4th at p. 1229.)

Fourth, the court denies Defendants’ motion to strike the general prayer for emotional distress damages because, although it appears that “damages for emotional distress do not constitute a recoverable item of damages for fraud[,]” Plaintiffs have also alleged a cause of action for breach of fiduciary duty, for which emotional distress damages may be recoverable. (Code Civ. Proc., § 436; Devin v. United Services Auto Assn. (1992) 6 Cal.App.4th 1149, 1162; Ibid. [“it is the general rule that negligence which causes only monetary harm does not support an award of emotional distress damages”] [emphasis in original]; Jahn v. Brickley (1985) 168 Cal.App.3d 399, 406 [(1) noting that the plaintiff prevailed on the tort theories of fraud and breach of fiduciary relationship, and (2) stating that “‘a plaintiff who as a result of a defendant’s tortious conduct loses his property and suffers mental distress may recover not only for the pecuniary loss but also for his mental distress’”].)

The burden is on the plaintiff “to articulate how it could amend its pleading to render it sufficient.”¿ (Palm Springs Villas II Homeowners Assn., Inc. v. Parth (2016) 248 Cal.App.4th 268, 290.)¿ To satisfy that burden, a plaintiff “must show in what manner he can amend his complaint and how that amendment will change the legal effect of his pleading.”¿ (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349.) The court finds that Plaintiffs have not shown how they can amend their request for emotional distress damages in connection with the cause of action for negligence and therefore grants the motion to strike the term “psychological distress” in paragraph 41 of the Complaint without leave to amend.

The court overrules defendants Yoav Saraff and Concord Real Estate Services, Inc.’s demurrer to plaintiffs Gary Bairos and Richard Bairos’s Complaint.

The court grants defendants Yoav Saraff and Concord Real Estate Services, Inc.’s motion to strike (1) the prayer for punitive damages as alleged against defendant Concord Real Estate Services, Inc., and (2) the reference to “psychological distress” in paragraph 41 of the Complaint.

The court grants plaintiffs Gary Bairos and Richard Bairos 20 days leave to file a First Amended Complaint that cures the defects in their request for punitive damages against defendant Concord Real Estate Services, Inc. The court does not grant leave to amend the allegation that they suffered psychological distress in paragraph 41 of the Complaint.

The court orders defendants Yoav Saraff and Concord Real Estate Services, Inc. to give notice of this ruling.

[1] Defendants have not argued that they did not have a duty to not engage in those acts for any other reason.

[2] The court disagrees with Defendants’ characterization of this cause of action as “effectively alleg[ing] a breach of contract claim” against them. (Dem, p. 7:7-13.)

[3] The court notes that, although paragraph 59 does not expressly incorporate the preceding allegations, that paragraph states that, “[i]n addition to the allegations of the” first through fourth causes of action, Defendants engaged in the following actionable conduct, such that it appears that Plaintiffs intended to incorporate the preceding allegations. The court further notes that Defendants did not argue that this cause of action does not state facts sufficient to constitute a cause of action based on any reason other than their contention that Plaintiffs did not allege specific facts regarding Defendants’ knowledge of the status of the subject license. (Dem., p. 9:13-16.)

[4] The court notes that Defendants did not challenge any specific elements of this cause of action.

gary bairos , et al.; Plaintiffs, vs. yoav sarraf , et al.; Defendants.	Case No.:	24STCV07935

	Hearing Date:	March 25, 2025

	Time:	10:00 a.m.

	[tentative] Order RE: (1) defendants’ demurrer to complaint (2) defendants’ motion to strike portions of complaint