Judge: Ronald F. Frank, Case: 20TRCV00772, Date: 2022-12-13 Tentative Ruling
Case Number: 20TRCV00772 Hearing Date: December 13, 2022 Dept: 8
Tentative Ruling¿
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HEARING DATE: December 13, 2022¿¿
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CASE NUMBER: 20TRCV00772
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CASE NAME: Marine
Gasparian, et al v. Rolls-Royce Motor Cars NA, LLC, et al
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MOVING PARTY: Defendant, Rolls-Royce Motor Cars Financial Services
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RESPONDING PARTY: Plaintiffs, Avakian Engineering, Inc. and Marine Gasparian
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TRIAL DATE: None set¿
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MOTION:¿ (1) Demurrer¿
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Tentative Rulings: (1) Defendant Demurrer is
SUSTAINED as to the breach of contract claim, and the Court will take oral argument
as to whether one more opportunity to amend should be accorded. As to the cause of action for negligence,
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I. BACKGROUND¿¿
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A. Factual¿¿
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On October 26, 2020, Plaintiffs
Avakian Engineering, Inc., and Marine Gasparian (collectively “Plaintiffs”)
filed this action against Rolls-Royce Motor Cars NA, LLC, Rolls-Rpyce Cars
Financial Services, a division of BMW Financial Services NA, LLC, O’Gara Coach
Company LLC, Neil Martin, and DOES 1 through 20.
On May 31, 2022, Plaintiffs filed
a third amended complaint (“TAC”) against Defendants alleging causes of action
for: (1) Breach of Contract; (2) Negligence; (3) Negligence; and (4) Fraud.
Defendant, Rolls-Royce Motor Cars
Financial Services, a Division of BMW Financial Services NA, LLC (“Defendant”)
now demurs to Plaintiffs’ TAC.
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B. Procedural¿¿
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On July 22, 2022, Defendant filed
this demurrer to Plaintiff’s TAC. On November 30, 2022, Plaintiffs filed an
opposition to Defendant’s demurrer. On December 6, 2022, Defendant filed a
reply brief. On May 11, 2022, Judge
Tanaka sustained Defendant’s Demurrer to the Second Amended Complaint, with
leave to amend.
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¿II. MOVING PARTY’S GROUNDS
FOR THE DEMURRER¿¿
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Defendant demurs to Plaintiffs’ Third
Amended Complaint on the grounds that: (1) The First Cause of Action against
Defendant for Breach of Contract fails to state facts sufficient to constitute
a cause of action pursuant to California Code of Civil Procedure §
430.10(e); and (2) The Third Cause of Action against Defendant for Negligence
fails to state facts sufficient to constitute a cause of action pursuant to California
Code of Civil Procedure § 430.10(e).
Judge Tanaka had previously sustained a similar demurrer to the SAC with
leave to amend, so the Court is mindful of the prior ruling and of a comparison
of what changes Plaintiff may have made in the TAC as compared to the SAC. The Demurrer argues that there are few
material changes in the most current pleading, but that Plaintiffs omitted two
key admissions made in the SAC: that statements Ms. Gasparian and/or Avakian made
in the credit application about her income and title at the plaintiff company were
false
III. REQUEST FOR JUDICIAL
NOTICE
Defendant
requested that this Court take Judicial Notice of Plaintiffs’ Second Amended
Complaint. The Court agrees to GRANT Defendant’s request for judicial notice
pursuant to California Evidence Code §§ 452(d), (g), and (h).
IV. ANALYSIS¿
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A. Demurrer¿¿¿
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A demurrer can be used only to challenge defects that
appear on the face of the pleading under attack or from matters outside the
pleading that are judicially noticeable. (Blank v. Kirwan (1985) 39
Cal.3d 311, 318.) “To survive a demurrer, the complaint need only allege facts
sufficient to state a cause of action; each evidentiary fact that might
eventually form part of the plaintiff’s proof need not be alleged.” (C.A. v.
William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872.) For
the purpose of testing the sufficiency of the cause of action, the demurrer
admits the truth of all material facts properly pleaded. (Aubry v. Tri-City
Hospital Dist. (1992) 2 Cal.4th 962, 966-967.) A demurrer “does not admit
contentions, deductions or conclusions of fact or law.” (Daar v. Yellow Cab
Co. (1967) 67 Cal.2d 695, 713.)¿¿¿
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A pleading is uncertain if it is ambiguous or unintelligible.
(Code Civ. Proc., § 430.10, subd. (f).) A demurrer for uncertainty may lie if
the failure to label the parties and claims renders the complaint so confusing
defendant cannot tell what he or she is supposed to respond to.¿ (Williams
v. Beechnut Nutrition Corp. (1986) 185 Cal.App.3d 135, 139, fn. 2.)
However, “[a] demurrer for uncertainty is strictly construed, even where a
complaint is in some respects uncertain, because ambiguities can be clarified
under modern discovery procedures.” (Khoury v. Maly's of California, Inc.
(1993) 14 Cal.App.4th 612, 616.)¿¿
Breach
of Contract
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To
state a cause of action for breach of contract, 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.) Breach is the key element for purposes of the
instant demurrer.
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.) In some circumstances, a plaintiff may also “plead
the legal effect of the contract rather than its precise language.” (Construction Protective Services, Inc. v.
TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 198-199.) The TAC attaches the Lease as well as the credit
application and Defendant’s correspondence with Plaintiffs before and after the
repossession and auction sale.
Here, Defendant argues that Plaintiffs’ Breach of Contract claim is
insufficiently pled because their own allegations and exhibits attached to the
TAC establish that Defendant did not breach the terms of the lease as a matter
of law. The lease reflects the following:
Default
and Remedies. I [Plaintiff] will be in default under the Lease if:
…(g)
Any information in my credit application or a guarantor’s credit application is
false or misleading.” (Paragraph 26(g).)
If
I [Plaintiffs] am in default, you [BMW FS] may do any or all of the following:
(I) Terminate this Lease and my
rights to possess and use the Vehicle;
(II) Take possession of the Vehicle
by any method permitted by law…”
(Paragraph
26.) Defendant asserts that by the express terms of the Lease, BMW FS was entitled
to declare a default, terminate the Lease, and dispose of the collateral in a
commercially reasonable way, if any
information included in Plaintiffs’ Credit Application to secure financing for
the lease of the Rolls-Royce was false or misleading. As previously held by
Judge Tanaka in ruling on the demurrer to the SAC, Defendant has the better of the
argument.
In opposition, Plaintiffs argue that
the breach of contract occurred when Defendant failed to offer Plaintiff an
option to cure, per section 26 of the Agreement. Plaintiff asserts that
Defendants’ decision to terminate Plaintiffs’ lease and repossess the Vehicle
came as a result of Defendant’s belief that Plaintiff’s were associated with
Defendant A&D Body Shop, which Plaintiff believes Defendant deems a
problematic body shop. Plaintiff notes that it took the Vehicle to A&D Body
shop to receive a quote for a minor windshield repair and argue that the
Vehicle was in the wrong place at the wrong time. However, the option to cure
is not a contractual right of the lessee but rather a permissive alternative
the Defendant “may” elect. Defendant’s election
not to exercise the option cannot constitute a breach of the Lease.
Plaintiffs’ TAC alleges that
Plaintiff entered into a valid written agreement for the lease of a Rolls with
Rolls-Royce Financial. (TAC, ¶ 41.) Plaintiffs assert that “[o]n or about June
11, 2019, Rolls-Royce and Rolls-Financial committed material breach of the
Agreement when they repossessed Plaintiffs’ Rolls based on false statements
made to Rolls-Royce Financial by the CHP. Rolls-Royce Financial conducted no
investigation into the false statements made by CHP. Rolls-Royce financial did
not attempt to contact Plaintiffs regarding the CHP’s false statements.” (TAC,
¶ 48.) Plaintiffs contend that “[u]sing false statements of a third-party is
not proper and Defendants have violated the terms of the Agreement and are in
breach.” (TAC, ¶ 50.) Yet, plaintiffs
cite no contractual duty that makes the use of information provided by third
parties “improper.”
Further, Plaintiffs’ TAC alleges that “Rolls-Royce Financial
breached the Agreement as Rolls-Royce Financial denied Plaintiffs’ request to
pay off the remainder of the contractually obligated payments, as only eight
(8) monthly payments remained on the term of the Agreement. Instead Rolls
Financial sold the vehicle and then charged Plaintiffs with a delinquency that
amounted to more than double the amount left on the Agreement.” (TAC, ¶ 54.) Lastly, Plaintiffs’ TAC alleges that “[a]s a
direct and proximate result of Defendant Rolls-Royce and Rolls-Royce
Financial's breach of contract, Plaintiffs have not only lost use and
possession of the Rolls but have also suffered damages in a sum subject to
proof at the time of trial, and no less than $500,000.00.” (TAC,
¶ 55.) But the contract did not give
Plaintiffs the right to cure their own breach of the false statements duty they
owed to Defendant by making the balance of their monthly statements, as
distinct from curing by buying out the entire contract as offered in Exhibit 3
to the TAC, the July 1, 2019 Notice of Plan to Sell.
Plaintiffs conclude that their TAC
alleges sufficient facts to bring a cause of action for breach of contract. The
Court disagrees, as Judge Tanaka did on May 11, 2022 in sustaining the demurrer
to the SAC which made nearly identical arguments. Here, Defendant argues that the repossession
and auction sale of the Rolls Royce were predicated on express contractual
rights in the contract giving the lender the right to repossess and sell the vehicle
at auction for factual misrepresentations by Plaintiffs as to Ms. Gasparian’s
income and position with the Plaintiff company.
The TAC thus fails to state the “breach” element of a breach of contract
cause of action. It is true that Plaintiff
alleges the repossession was based on different grounds, i.e., an alleged belief
that Plaintiffs were engaged in a fraudulent scheme with the body shop. (TAC, ¶ 52.) Plaintiff’s Opposition brief argues that BMW FS was unaware of the misrepresentations in the credit
application until after the repossession and auction sale had occurred, but that
is not what the TAC alleges in ¶ 49 or Exhibit 5, both of which aver
that BMW FS did in fact base its decision to repossess and its decision to sell
its collateral at auction because of the false statements reported to the CHP.
The Court will hear oral argument from Plaintiff as to whether it can
legitimately amend to cure this apparently fatal defect in the TAC, such as to
allege that Plaintiff tendered the Gross Early Termination Amount stated in the
Notice of Plan to Sell, or whether, as Defendant argues, leave to amend should
no longer be granted after multiple demurrers and multiple prior opportunities to
amend.
Negligence
In order to state a claim for negligence,
Plaintiff must allege the elements of (1) “the existence of a legal duty of
care,” (2) “breach of that duty,” and (3) “proximate cause resulting in an
injury.” (McIntyre v. Colonies-Pacific,
LLC (2014) 228 Cal.App.4th 664, 671.) Defendant asserts that “as
highlighted by the Court in its [May 11, 2022] Ruling on the Demurrer to the
SAC, Plaintiffs’ Negligence claim is based on the same alleged duties set in
their Breach of Contract claim.” (Demurrer, p. 8.) Generally, “a tortious
breach of contract…may be found when (1) the breach is accompanied by a
traditional common law tort, such as fraud or conversion; (2) the means used to
breach the contract are tortious, involving deceit or undue coercion or; (3)
one party intentionally breaches the contract intending or knowing that such a
breach will cause severe, unmitigable harm in the form of mental anguish,
personal hardship, or substantial consequential damages.” (Freeman &
Mills, Inc. v. Belcher Oil Co. (1995) 11 Cal.4th 85, 10.) Additionally,
“[f]ocusing on intentional conduct gives substance to the proposition that a
breach of contract is tortious only when some independent duty arising from
tort law is violated. (Elrich v. Menezes (1999) 21 Cal.4th 543, 553.) In
ruling on the demurrer to the SAC, Judge Tanaka ruled that Plaintiffs had
failed to state a negligence cause of action given the lack of any independent duty
beyond those arising from the contractual relationship.
Plaintiffs’ TAC alleges that
Defendant owed them a duty of care under Biakanja v. Irving (1958) 49
Cal.2d 647, holding that a lender may be found to owe a borrower a general duty
of care surrounding in negligence for their own mishandlings. In Biakanja,
the California Supreme Court held that the intended beneficiary of a failed
testamentary gift could recover from a notary public who negligently prepared
the will. (Id. at 19.) The notary owed a contractual duty only to the
testator – not to the plaintiff. (Id. at 17.) However, the court held
that the notary owed a tort duty to the plaintiff “even though they were not in
privity of contract” and set out a case-by case test for determining whether
“the defendant will be held liable to a third person not in privity.” (Id.
at 18-19.) The test requires consideration of six factors: (1) the extent to
which the transaction was intended to affect the plaintiff; (2) the
foreseeability of harm to the plaintiff; (3) the degree of certainty that the
plaintiff suffered injury; (4) the closeness of the connection between the
defendant's conduct and the injury; (5) the moral blameworthiness of the
defendant's conduct; and (6) the policy of preventing future harm.” (Ibid.)
Plaintiff’s TAC alleges that each
factor is met here. (TAC, ¶ 66(a)-(f).) However, as noted by Defendant in its
Demurrer and Reply brief, the Biakanja balancing factors apply when
there is no privity of contract between the parties. Lower California courts
have declined to extend Biakanja to cases where the parties are in privity
with one another. (See Stop Loss Ins. Brokers, Inc. v. Brown & Toland
Med. Grp. (2006) 143 Cal.App.4th 1036, 1042.) Here, Plaintiffs admit in
their TAC that they are in privity of contract with Defendant. (TAC, ¶ 15-22.)
As such, Defendants’ duty to Plaintiff does not extend outside of its
obligations under the Lease in its position as a lender.
Because the Agreement specifically notes that Defendant
has the right to terminate the lease if “…(g) Any information
in my credit application or a guarantor’s credit application is false or
misleading,” and Plaintiffs’ TAC admits to false and/or misleading information
on the Agreement, there cannot be negligence on the part of Defendant when it
repossessed the vehicle against a party in privity. (Agreement Paragraph 26(g).)
In Plaintiffs’ TAC, it notes that “Gasparian is an employee of AE, holding a
sales position, not “Vice President” as stated on the Application. (TAC,
¶ 34.) Based on the foregoing, Plaintiff has not alleged sufficient facts to
state a cause of action for negligence. The defect in pleading cannot be cured given
the Defendant’s termination right contained in the contract and the judicial
admission of privity that defeats reliance on the Biakanja exception to
the general rule that there is no tort duty when a contracting party exercises
a right given under the contract. As such, Defendant’s demurrer on this issue is
sustained without leave to amend.
IV. CONCLUSION¿¿
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The Demurrer is sustained without
leave to amend, given the multiple prior opportunities Judge Tanaka gave to
amend the same deficiencies this Court finds with the TAC. Moving party is ordered to give notice.¿¿¿¿