Judge Salvatore Sirna, Case 21PSCV00654 2023-02-21 Tentative Ruling

Judge: Salvatore Sirna, Case: 21PSCV00654, Date: 2023-02-21 Tentative Ruling

The Court may change tentative rulings at any time. Therefore, counsel are advised to check this website periodically to determine whether any changes or updates have been made to the tentative ruling. Counsel may submit on the tentative rulings by calling the clerk in Department G at (909) 802-1104 prior to 8:30 a.m. the morning of the hearing.

Case Number: 21PSCV00654 Hearing Date: February 21, 2023 Dept: G

Cross-Defendants Weiss Industrial Holdings, LLC; Art Weiss, Inc.; and Matthew A. Sawyer’s Demurrer to Defendants/Cross-Complainants’ Third Amended Cross-Complaint

Respondent: Defendants/Cross-Complainants Mudita Health and Wellness, Inc. and Orlander Earl Robinson

Cross-Defendants Weiss Industrial Holdings, LLC; Art Weiss, Inc.; and Matthew A. Sawyer’s Motion to Strike Defendants/Cross-Complainants’ Third Amended Cross-Complaint

Respondent: Defendants/Cross-Complainants Mudita Health and Wellness, Inc. and Orlander Earl Robinson

TENTATIVE RULING

Cross-Defendants Weiss Industrial Holdings, LLC; Art Weiss, Inc.; and Matthew A. Sawyer’s Demurrer to Plaintiff’s Complaint is OVERRULED.

Cross-Defendants Weiss Industrial Holdings, LLC; Art Weiss, Inc.; and Matthew A. Sawyer’s Motion to Strike Portions of Plaintiff’s Complaint is GRANTED IN PART as to allegations concerning Wendy Sawyer (TACC, ¶ 10, 13), Vlad Rodov (TACC, ¶ 18, 53, 54), and Cross-Defendants’ prior arguments (TACC, ¶ 37, 40) and DENIED IN PART as to the remainder.

BACKGROUND

This is an action arising from the alleged breach of a lease agreement. On March 6, 2017, Weiss Industrial Holdings, LLC (Weiss) entered into a two-year written lease agreement with Mudita Health and Wellness, Inc. (Mudita) in which Mudita agreed to lease Unit B in a Baldwin Park property from Weiss for $11,050 per month. Mudita’s principal, Orlander Earl Robinson (Robinson) agreed to be a guarantor for the lease agreement. In December 2017, Mudita and Robinson executed a lease for Unit A in the same property from Weiss with Mudita agreeing to move in on February 1, 2018.

Beginning December 1, 2018, Weiss alleges Mudita failed to make rental payments, failed to pay their share of the common area operating expenses, and abandoned the property before expiration of the lease. Weiss claims total damages of $171,677.86, including $55,250 in unpaid rent, $58,510.81 in repairs, $672.95 in security deposits, and $79,344.10 in common area operating expenses minus the $22,100 security deposit. Mudita alleges Weiss never let Mudita take possession of Unit A despite Mudita making payments of $142,249.25 plus a deposit of $32,826.75 from February to December 2018. After an electrical fire in Unit A destroyed the electrical systems for the property, Mudita alleges Weiss refused to provide temporary generators, resulting in a loss of Mudita’s cannabis crops and total business losses of $1,636,425. Mudita then argues it had to abandon the property as the purposes of the lease had been frustrated.

On August 11, 2021, Weiss filed a complaint against Mudita, Robinson, and Does 1-10, alleging (1) common counts, (2) breach of contract, (3) breach of written guaranty, and (4) unjust enrichment. On September 24, default was entered against Mudita and Robinson. On January 5, 2022, the court vacated the entries of default.

On February 9, 2022, Mudita and Robinson (collectively, Cross-Complainants) filed a cross-complaint against Weiss, Art Weiss, Inc. (Art Weiss), Matthew A. Sawyer (Matthew Sawyer), Wendy A. Sawyer (Wendy Sawyer), and Roes 1-50 (collectively, Cross-Defendants), alleging the following causes of action: (1) fraud, (2) negligence, (3) unfair business practices, (4) breach of contract, (5) breach of contract, (6) breach of the covenant of good faith and fair dealing, and (7) breach of the covenant of good faith and fair dealing. On June 8, the court sustained Cross-Defendants’ demurrer to the cross-complaint.

On June 23, 2022, Cross-Complainants filed a First Amended Cross-Complaint (FACC) against the same defendants alleging the same causes of action. On September 15, the court sustained Cross-Defendants’ demurrer to the FACC in part and overruled in part.

On October 6, 2022, Cross-Complainants filed a Second Amended Cross-Complaint (SACC) against the same defendants, minus Wendy Sawyer, alleging the same causes of action. On December 15, the court sustained Cross-Defendants’ demurrer to the SACC in part and overruled in part.

On January 17, 2023, Cross-Complainants filed a Third Amended Cross-Complaint (TACC) against the same defendants, replacing Roe 1 with Pro-Tek Stone & Tile, Inc. and alleging the same causes of action.

On January 25, 2023, Cross-Defendants filed the present demurrer and motion to strike. Prior to filing on January 23, Cross-Defendants’ counsel met and conferred telephonically with Cross-Complainant’s counsel and was unable to reach a resolution. (Patterson Decl., ¶ 10-11.)

A hearing on the demurrer and motion to strike as well as a case management conference are set for February 21, 2023.

REQUEST FOR JUDICIAL NOTICE

Cross-Defendants’ request for judicial notice of prior filings and orders in the present action (Exhibit 1-8) and a cannabis zoning map from the City of Baldwin Park (Exhibit 9) is GRANTED pursuant to Evidence Code section 452, subdivisions (d) and (c).

ANALYSIS

Cross-Defendants generally demur to the TACC as to Robinson and demur to the first cause of action (fraud), second cause of action (negligence), fourth cause of action (breach of contract–Unit B), fifth cause of action (breach of contract–Unit A), sixth cause of action (breach of the covenant of good faith and fair dealing–Unit B), and seventh cause of action (breach of the covenant of good faith and fair dealing–Unit A).

For the reasons set forth below, the court OVERRULES Cross-Defendants’ general demurrer and demurrer while GRANTING IN PART and DENYING IN PART Cross-Defendants’ motion to strike.

Legal Standard

A party may demur to a complaint on the grounds that it “does not state facts sufficient to constitute a cause of action.” (Code Civ. Proc., § 430.10, subd. (e).) A demurrer tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747 (Hahn).) When considering demurrers, courts accept all well pleaded facts as true. (Fox v. JAMDAT Mobile, Inc. (2010) 185 Cal.App.4th 1068, 1078.) 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 pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed.” (SKF Farms v. Superior Court (1984) 153 Cal.App.3d 902, 905.) “The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action.” (Hahn, supra, at p. 747.)¿

General Demurrer

Cross-Defendants generally demur to Cross-Complainants’ TACC as to Robinson, arguing Robinson lacks standing to recover damages because the TACC fails to allege Robinson suffered any damages. The court disagrees.

As Cross-Complainants correctly note in their opposition, the court already rejected this argument in a September 15, 2022, ruling that overruled Cross-Defendants’ general demurrer to the FACC. There, the court noted the FACC established Robinson’s standing by alleging Robinson was fraudulently induced to be the guarantor to the lease agreements and subject to Cross-Defendants’ collection actions. (9/15/2022 Ruling, p. 4.) The TACC alleges the same, establishing Robinson was a guarantor of the lease agreement and is now subject to collections actions by Cross-Defendants. (TACC, ¶ 15-18, 33.) Thus, there is no merit to Cross-Defendants’ general demurrer.

Accordingly, Cross-Defendants’ general demurrer is OVERRULED.

Fraud (First Cause of Action)

Cross-Defendants contend Cross-Complainants’ first cause of action for fraud fails to plead sufficient facts to state a claim. The court disagrees.

“The elements of fraud, which give rise to the tort action for deceit, are (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638, quoting 5 Witkin, Summary of Cal. Law (9th ed. 1988) Torts, § 676, p. 778.) 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. (Id., at p. 645.)

In this case, Cross-Defendants contend the TACC fails to state a claim of fraud for three reasons. First, Cross-Defendants argue TACC’s claim that Cross-Defendants fraudulently induced Cross-Complainants to enter lease agreements is not supported by the pleading and does not establish damages for lost cannabis crops. Cross-Defendants claim TACC’s allegation that Cross-Defendants “knowingly allowed the cultivation of cannabis at the property despite lacking the requisite zoning” at paragraph 31 is contradicted by paragraph 5, which states “Mudita has complied with the relevant California law at all times for its business.” The court disagrees as the pleadings establish Cross-Complainants complied with all relevant California law, except zoning restrictions because of Cross-Defendants’ alleged misrepresentations.

Second, Cross-Defendants contend TACC’s claim that Cross-Defendants made payments for Unit A is contradicted by the fact that the TACC also alleges a third-party Chelsea Consulting Corp. (Chelsea Consulting) made payments for Unit A. However, as Cross-Defendants admit, the third-party did not make all the payments for Unit A as Cross-Complainants made a $3,000 payment. (TACC, ¶ 59.) Thus, Cross-Defendants’ contention is without merit as the TACC does establish Cross-Defendants tendered payment for Unit A.

Third, Cross-Defendants maintain the allegations against Matthew Sawyer are contradicted by exculpatory clauses in the lease agreement. The court also finds this argument without merit as contracts may not waive or limit liability for fraud and misrepresentation. (See Food Safety Net Services v. Eco Safe Systems USA, Inc. (2012) 209 Cal.App.4th 1118, 1126.) Furthermore, corporate directors, officers, and shareholders may be held personally liable for intentional torts like fraud if they ordered or participated in the tortious conduct. (Wyatt v. Union Mortgage Co. (1979) 24 Cal.3d 773, 785.) Here, Cross-Complainants allege Matthew Sawyer misrepresented the legality of cultivating cannabis on the Baldwin Park property and collected rent for Unit A with no intention of allowing Cross-Complainants to utilize the unit. (TACC, ¶ 29.)

Accordingly, the court finds Cross-Complainants have adequately pled a cause of action for fraud.

Accordingly, Cross-Defendants’ demurrer to Cross-Complainants’ first cause of action is OVERRULED.

Negligence (Second Cause of Action)

Cross-Defendants maintain Cross-Complainants’ second cause of action for negligence fails to plead sufficient facts to state a claim. The court disagrees.

The basic of elements of a negligence claim are (1) duty, (2) breach, (3) causation, and (3) damages. (Leslie G. v. Perry & Associates (1996) 43 Cal.App.4th 472, 480.) In this case, Cross-Defendants maintain the TACC continues to fail to establish Weiss and Matthew Sawyer owed a duty to maintain the electrical systems on the Baldwin Park property that caused a fire in Unit A.

In sustaining the demurrer to the FACC’s cause of action of negligence, the court found the lease agreement made the tenants responsible for maintaining electrical equipment and systems in their units and that Cross-Complainants failed to establish Weiss and Matthew Sawyer owed or breached a duty in regards to these systems. (9/15/2022 Ruling, p. 6-7.) In sustaining another demurrer to the same cause of action in the SACC, the court came to the same conclusion. (12/15/2022 Ruling, p. 5.) In doing so, the court analyzed the pertinent lease provisions and determined tenants had the sole responsibility for maintaining electrical utility systems for units. (12/15/2022 Ruling, p. 4-5.) In the TACC, Cross-Complainants provide more detail. They allege the electrical system was inaccessible as it was located in a locked electrical access room in Unit A to which only Weiss and Matthew Sawyer had access. (TACC, ¶ 36-38.) As a result, Cross-Complainants were unable to access or maintain the electrical systems for Unit A and believe the other tenant for Unit A may have been denied access as well. (TACC, ¶ 36-38.)

It is well established that “a commercial landowner cannot totally abrogate its landowner responsibilities merely by signing a lease.” (Resolution Trust Corp. v. Rossmoor Corp. (1995) 34 Cal.App.4th 93, 101, quoting Mora v. Baker Commodities, Inc. (1989) 210 Cal.App.3d 771, 781 (Mora).) Instead, “[a]s the owner of property, a lessor out of possession must exercise due care and must act reasonably toward the tenant as well as to unknown third persons.” (Mora, supra, 210 Cal.App.3d at p. 781.) In determining whether a landowner acted with ordinary care in managing property, possession and control are important factors because “[i]t would not be reasonable to charge a lessor with liability if the lessor did not have the power, opportunity and ability to eliminate the danger.” (Id., at p. 779-780.)

Thus, with regards to Weiss, Cross-Complainants have adequately pled Weiss breached the duty to exercise due care as a landlord by failing to maintain electrical systems for the units. While the lease agreement placed that duty on the tenants, Cross-Complainants have established Weiss assumed that duty when it prevented tenant access to the units’ electrical systems. With regards to Matthew Sawyer, Cross-Complainants allege Matthew Sawyer was a member or manager of Weiss and represented Weiss on the lease agreements with Cross-Complainants. (TACC, ¶ 9.) However, “[d]irectors are jointly liable with the corporation and may be joined as defendants if they personally directed or participated in the tortious conduct.” (Frances T. v. Village Green Owners Assn. (1986) 42 Cal.3d 490, 504.)

Here, Cross-Complainants allege Matthew Sawyer and Weiss both had exclusive control over the electrical room and denied access to Cross-Complainants. (TACC, ¶ 23, 36-38.) While Cross-Defendants claim the lease agreement contains exculpatory provisions for brokers that apply to Matthew Sawyer, the court notes Matthew Sawyer is alleged to be both a broker representing Art Weiss and a manager or member of Weiss. (TACC, ¶ 9.) The TACC does not establish Matthew Sawyer was acting as a broker or on behalf of Art Weiss when Matthew Sawyer prevented access to the electrical room.

Thus, Cross-Complainants had adequately pled a cause of action for negligence against Cross-Defendants.

Accordingly, Cross-Defendants’ demurrer to Cross-Complainants’ second cause of action is OVERRULED.

Breach of Contract and Covenant of Good Faith and Fair Dealing (Fourth, Fifth, Sixth, and Seventh Causes of Action)

Cross-Defendants argue Cross-Complainants’ causes of action for breach of contract as to Unit B (fourth cause of action) and Unit A (sixth cause of action) and breach of the covenant of good faith and fair dealing as to Unit B (fifth cause of action) and Unit A (seventh cause of action) fail to plead sufficient facts to state a claim. The court disagrees.

To state a cause of action for breach of contract, 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.) “[T]he factual elements necessary to establish a breach of the covenant of good faith and fair dealing are: (1) the parties entered into a contract; (2) the plaintiff fulfilled his obligations under the contract; (3) any conditions precedent to the defendant's performance occurred; (4) the defendant unfairly interfered with the plaintiff's rights to receive the benefits of the contract; and (5) the plaintiff was harmed by the defendant's conduct.” (Rosenfeld v. JPMorgan Chase Bank, N.A. (2010) 732 F.Supp.2d 952, 968, citing BAJI No. 325.)

Unit B

Cross-Defendants contend Cross-Complainants failed to establish an excuse for nonperformance of the lease agreement with respect to Unit B because Cross-Complainants allege contradictory reasons. First, Cross-Defendants point to Cross-Complainants’ allegation that they abandoned Unit B because Cross-Defendants’ failure to maintain electricity frustrated the purpose of the lease. (TACC, ¶ 24.) Second, Cross-Complainants alleged Cross-Defendants locked Cross-Complainants out of Unit B and seized Cross-Complainants’ equipment and property. (TACC, ¶ 26.) While the court agrees these allegations are contradictory, conclusory, and vaguely pled, “a demurrer will not lie to a part of a cause of action. (Cornejo v. Lightbourne (2013) 220 Cal.App.4th 932, 944.) Cross-Complainants also allege they paid approximately $928,200 in rent for Unit B at a rate of $11,500 a month. (TACC, ¶ 16, 22.) Thus, Cross-Complainants have alleged sufficient facts to establish performance under the lease for Unit B. While Cross-Defendants also contend the demurrer should be sustained as to the sixth cause of action for breach of the covenant of good faith and fair dealing, they fail to provide any argument on this point.

Accordingly, Cross-Defendants’ demurrer to Cross-Complainants’ fourth and sixth causes of action are OVERRULED.

Unit A

Cross-Defendants maintain Cross-Complainants failed to establish breach of contract and the covenant of good faith and fair dealing as to Unit A because the TACC fails to establish damages. First, Cross-Defendants point to the allegation that Cross-Complainants paid $3,000 to Cross-Defendants while Chelsea Consulting paid $24,187. (TACC, ¶ 59.) Second, Cross-Defendants claim these amounts do not add up as Cross-Complainants allege Mudita “paid approximately $142,249.25 in rent for Unit A between February and December 2018 in addition to a $32,826.75 deposit.” (TACC, ¶ 21.) However, the amounts listed in paragraph 59 are not exhaustive and list one check in October, one check in June, and two checks in March. (TACC, ¶ 59.) Thus, it is apparent that the amounts listed in paragraph 59 are a portion of the total $142,249.25 paid by Cross-Complainants between February and December 2018.

Accordingly, Cross-Defendants’ demurrer to Cross-Complainants’ fifth and seventh causes of action are OVERRULED.

Motion to Strike

Cross-Defendants move to strike allegations in the TACC on the grounds of irrelevance, falsity, inconsistency, and ambiguity. The motion to strike is GRANTED IN PART as to the TACC’s allegations referencing Wendy Sawyer (TACC, ¶ 10, 13), Vlad Rodov (TACC, ¶ 18, 53, 54), and Cross-Defendants’ prior arguments (TACC, ¶ 37, 40.) and DENIED IN PART as to the remainder.

Upon a party’s motion or the court’s own motion, the court may strike any irrelevant, false, or improper matter inserted in any pleading. (Code Civ. Proc., § 436, subd. (a).) The court may also “[s]trike out all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court.” (Code Civ. Proc., § 436, subd. (b).) “The grounds for a motion to strike shall appear on the face of the challenged pleading or from any matter of which the court is required to take judicial notice.” (Code Civ. Proc., § 437, subd. (a).)

Irrelevance

Cross-Defendants argue all references to Wendy Sawyer in the TACC at paragraphs 10 and 13 and in the proof of service should be stricken as irrelevant. An irrelevant allegation is “[a]n allegation that is not essential to the statement of a claim or defense.” (Code Civ. Proc., § 431.10, subd. (b)(1).) It also includes “[a]n allegation that is neither pertinent to nor supported by an otherwise sufficient claim or defense.” (Code Civ. Proc., § 431.10, subd. (b)(2).) In the court’s two previous rulings, the court notes Cross-Complainants included Wendy Sawyer in the cross-complaint without alleging any cause of action against Wendy Sawyer. (9/15/2022 Ruling, p. 5; 12/15/2022 Ruling, p. 2-3.) Because the TACC does the same, the court finds naming Wendy Sawyer is not essential to Cross-Complainants’ claims and GRANTS the motion to strike as to this issue.

Falsity

Cross-Defendants contend five different grounds for striking portions of the TACC on the grounds of falsity. “[A] court may strike false, i.e. untrue, matters contained in a pleading whenever their falsity or untruthfulness is revealed by facts which are judicially noticed.” (Garcia v. Sterling (1985) 176 Cal.App.3d 17, 21.)

First, Cross-Defendants maintain the TACC’s allegations that Cross-Defendants’ paid rent for Unit A in excess of $3,000 in paragraphs 1, 18, 21, 32, and 59 are false. As noted previously in the court’s analysis of Cross-Complainants’ breach of contract claims, this argument has no merit. While paragraph 59 of the TACC listed a series of cashier checks, it did not purport to list all rent payments made between February and December of 2018 and instead prefaced the list of payments with the preposition “including,” which is ordinarily considered to be “a term of enlargement rather than limitation.” (Cf. Ornelas v. Randolph (1993) 4 Cal.4th 1095, 1101.) Thus the court DENIES the motion to strike as to this issue.

Second, Cross-Defendants argue the TACC’s allegation that Vlad Rodov represented Weiss in the negotiation of the lease agreement for Unit A in paragraphs 18, 53, and 54 are false. Cross-Defendants claim these allegations are contradicted by section 1.10 and the signature page of the lease agreement attached as Exhibit 1 to the TACC. The court agrees as the lease agreement lists Vlad Rodov as broker for lessee, not lessor, and Vlad Rodov’s signature is located under Robinson’s, not Matthew Sawyer’s.

While Cross-Defendants insist the court cannot make evidentiary findings and that allegations in the cross-complaint are presumed to be true, “[e]xhibits attached to the complaint take precedence to the extent they contradict allegations in the complaint.” (Bank of New York Mellon v. Citibank, N.A. (2017) 8 Cal.App.5th 935, 943; see also Dodd v. Citizens Bank of Costa Mesa (1990) 222 Cal.App.3d 1624, 1627 [“[F]acts appearing in exhibits attached to the complaint will also be accepted as true and, if contrary to the allegations in the pleading, will be given precedence.”].) Thus, the court GRANTS the motion to strike as to this issue.

Third, Cross-Defendants contend the TACC’s allegation that there is no legal area to cultivate cannabis in the City of Baldwin Park is false. (TACC, ¶ 30.) As support, Cross-Defendants reference a January 2020 map by the City of Baldwin Park that displays the locations where cannabis cultivation is permitted within Baldwin Park. (RJN, Ex. 9.) However, because the allegations of the TACC concern leases that were executed in 2017 and the map provided by Cross-Defendants was not issued until January 2020, Cross-Defendants have not demonstrated this allegation is false. (TACC, ¶ 15-18) Thus, the court DENIES the motion to strike as to this issue.

Fourth, Cross-Defendants maintain the TACC’s misstates Cross-Defendants’ prior arguments, including that they disclaim any duty to maintain electrical standards, that tenants should “magically discern” electrical problems beyond their unit, and that Cross-Defendants “blame the tenants.” (TACC, ¶ 37, 40.) Because the court finds these statements are not essential to establishing Cross-Complainants’ claims, the court GRANTS the motion to strike as to these statements.

Fifth, Cross-Defendants argue the TACC’s allegations that Matthew Sawyer was a real estate agent, attorney, or manager/member of Weiss are false and not established by the lease agreement. While the October 2017 lease agreement lists Matthew Sawyer as a broker for Weiss, Matthew Sawyer signed the October 2017 lease agreement on the behalf of Weiss as Weiss’s manager and also signed an addendum as Weiss’s manager as well. (TACC, Ex. 1, Lease, p. 1, 16; Addendum, p. 2.) Thus, not only do the exhibits fail to contradict the TACC’s allegations, but they actually support the allegation that Matthew Sawyer is a manager for Weiss. Accordingly, the court DENIES the motion to strike as to this issue.

CONCLUSION

Based on the foregoing, Cross-Defendants’ demurrer to Cross-Complainants’ TACC is OVERRULED. Furthermore, Cross-Defendants’ motion to strike portions of Cross-Complainants’ TACC is GRANTED IN PART as to allegations concerning Wendy Sawyer (TACC, ¶ 10, 13), Vlad Rodov (TACC, ¶ 18, 53, 54), and Cross-Defendants’ prior arguments (TACC, ¶ 37, 40) and DENIED IN PART as to the remainder.

Cross-Defendants to answer the Third Amended Cross-Complaint in twenty (20) days.