Judge Ronald F. Frank, Case 21TRCV00085 2023-04-27 Tentative Ruling

Judge: Ronald F. Frank, Case: 21TRCV00085, Date: 2023-04-27 Tentative Ruling

Case Number: 21TRCV00085 Hearing Date: April 27, 2023 Dept: 8

Tentative Ruling

HEARING DATE: April 27, 2023¿

CASE NUMBER: 21TRCV00085

CASE NAME: Aries Global Logistics, Inc. v. Valley of the Sun Cosmetics, LLC, et al

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MOVING PARTY: Defendants, Ajmal Shehzad and Sofia Shehzad

RESPONDING PARTY: Plaintiff, Aries Global Logistics, Inc.

TRIAL DATE: 2/26/24

MOTION:¿ (1) Defendant’s Demurrer to the First Amended Complaint (“FAC”)

Tentative Rulings: (1) OVERRULED. An Answer to the FAC is due in 20 days

I. BACKGROUND¿

A. Factual¿

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On February 5, 2021, Plaintiff, Aries Global Logistics, Inc. (“Plaintiff”) filed a Complaint against Defendant, Valley of the Sun Cosmetics, LLC, and DOES 1 through 50. Plaintiff subsequently DOE’d in Defendants, Ajmal Shehzad and Sofia Shehzad. On September 20, 2022, Plaintiff filed a First Amended Complaint alleging causes of action for: (1) Breach of Written Contract; (2) Declaratory Relief; (3) Injunctive Relief; (4) Breach of the Covenant of Good Faith and Fair Dealing; (5) Quantum Meruit; (6) Account Stated; and (7) Fraud.

Defendants Ajmal Shehzad and Sofia Shehzad now demur to the fraud cause of action.

B. Procedural

On March 24, 2023, Defendants filed a demurrer to the 7^th cause of action. On April 14, 2023, Plaintiff filed an opposition. To date, no reply brief has been filed.

¿II. GROUNDS FOR MOTIONS

Defendants demur to the FAC on the grounds that they claim that Plaintiff failed to allege facts sufficient to bring a cause of action for fraud and is uncertain.

III. ANALYSIS ¿

A. Legal Standard

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.)¿

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.)¿

B. Discussion

Fraud

“The elements of fraud are (a) a misrepresentation (false representation, concealment, or nondisclosure); (b) scienter or knowledge of its falsity; (c) intent to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Hinesley v. Oakshade Town Ctr. (2005) 135 Cal.App.4th 289, 294.) The facts constituting the alleged fraud must be alleged factually and specifically as to every element of fraud, as the policy of “liberal construction” of the pleadings will not ordinarily be invoked. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.) To properly allege fraud against a corporation, the plaintiffs must plead the names of the persons allegedly making the false representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written. (Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157.)

Here, Defendants argue that Plaintiff fails to properly allege facts supporting their information and belief that Defendants Ajmal Shehzad and Sofia Shehzad used the payment for their personal use and benefit instead of paying Plaintiff for its services. Defendants contend that in Paragraph 23, 98 and 133, Plaintiff alleges that "Plaintiff is informed and believes", and based thereon alleges that the Payment was used by Defendant Ajmal Shehzad and Defendant Sofia Shehzad for their personal use and benefit" (FAC, ¶ 123, 98 and 133). Instead, Defendants contend that Plaintiff claims they made false representations as to the payment of products and their intention to pay for Plaintiff’s services. However, Defendants argue that there are no facts within the entire FAC that support the allegation that Defendant Ajmal Shehzad and Defendant Sofie Shehzad used the payment for their own personal use and benefit. Because of this, Defendants argue that Plaintiff fails to state the “how, when, where, to whom, and by what means.”

In opposition, Plaintiff asserts that its FAC sets out, with specificity, the fraud allegations against Defendants over the courts of 88 paragraphs. Plaintiff provides page numbers in which it alleged each element of a cause of action for fraud: (1) Defendants’ misrepresentations: ¶¶ 25-57; 100-134; (2) Defendants’ knowledge of falsity: ¶¶ 17-20; 92-95; (3) Defendants’ intent to defraud and induce AGL’s reliance: ¶¶ 17-20; 92-95; 135-136; (4) AGL’s justifiable reliance: ¶¶ 21; 96; 137; and (5) AGL’s damages: ¶¶ 59; 139. Plaintiff also clarifies that the demurrer takes issue with only three paragraphs related to the fraud cause of action, however, those paragraphs relate to Defendants’ alleged use of moneys owed to Plaintiff after Defendants’ allegedly perpetuated their fraudulent scheme against Plaintiff. Plaintiff further notes that there was no Motion to Strike accompanying this Demurrer, however, even if the three paragraphs were stricken, the fraud allegation would still be sufficiently plead. This Court agrees.

Defendants also argue that Plaintiff’s pleading of promissory fraud is fatally deficient because Plaintiff alleges in a conclusory fashion in paragraph 18, that "Defendant VOTS, through its various agents, made false representations and promises to Plaintiff. ... " Plaintiff further alleges in paragraph 20, that "throughout the course of their business relationship between the parties, Defendant VOTS did not intend to pay Plaintiff for its services ...” Defendants argue that the FAC does not have any pleadings that allege facts showing that VOTS did not intend to perform at the time it made the alleged promise.

In opposition, Plaintiff argues that Defendants wholly ignore the allegations in the FAC, and instead, micro-pick two paragraphs from the FAC (¶ 18 and ¶ 20) and argue that “[n]owhere in the FAC does Plaintiff allege facts showing that VOTS did not intend to perform at the time it made the alleged promise.” (Demurrer at p.7:24-27 to p. 8: 1-2.) However, Plaintiff’s Opposition illustrates each paragraph in the FAC that alleges Defendants’ fraudulent representations. The Court has used these references to identify that the FAC does properly allege promissory fraud.

Lastly, Defendant contends that Plaintiff’s fraud cause of action fails as to Ajmal Shehzad and Sofia Shehzad because the gravamen of Plaintiffs purported fraud cause of action is that VOTS promised to pay for the services rendered by Plaintiff pursuant to a written contract between Plaintiff and VOTS. (FAC, ¶ 64-68, 95.) Defendants note that by Plaintiffs own admission, VOTS is a California limited liability company. Thus, Defendants argue that VOTS is presumed to have a separate existence from its stockholders and the corporate form will only be disturbed when the end of justice requires this result. (Laird v. Capital Cities/ABC Inc. (1998) 68 Cal. App. 4th 727, 737.) Plaintiff here alleges in paragraphs 5 and 8, that Ajmal Shehzad and Sofia Shehzad are individuals. Defendants assert that there is nothing alleged anywhere in the FAC showing that both individuals are alter egos of VOTS that will warrant the piercing of VOTS' corporate veil.

In opposition, Plaintiff contends it is not required to plead “alter ego” liability in order to state a cause of action against Ajmal Shehzad and Sofia Shehzad, but nonetheless, has sufficiently done so. Although the Court recognizes that Plaintiff has not included a separate cause of action for alter ego, Plaintiff notes places in the FAC that allege Defendants were alter egos. For example, the FAC alleges that “[e]ach Defendant was a principal, partner, shareholder, agent, servant, employee, subsidiary, joint venturer, independent contractor or alter ego of the remaining Defendants, and at all times herein mentioned was acting within the course, scope and furtherance of said agency, service and employment. Plaintiff is informed and believes, and thereon alleges that at all times herein mentioned, each Defendant was acting with each of the other Defendants, and was acting as the agent, officer, servant, employee or joint venturer of their co-Defendants, and such acts were within the course, scope and purpose of their agency and/or hiring to advance a common business scheme and/or common business venture.” (FAC, ¶ 11.) While the conclusionary allegations of alter ego are not sufficient to sustain a separate cause of action for alter ego liability, there is not such cause of action alleged in the FAC.

IV. CONCLUSION¿

Based on the foregoing, Defendant’s Demurrer is OVERRULED as to the fraud cause of action. Plaintiff is granted 20 days to answer the FAC.