Judge Salvatore Sirna, Case Number: 22PSCV00585, Date: 2023-05-24 Tentative Ruling

Judge: Salvatore Sirna, Case: 22PSCV00585, Date: 2023-05-24 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: 22PSCV00585 Hearing Date: May 24, 2023 Dept: G

Cross-Defendants Horizon Tire, Inc., Brian Han, and Vivienne Wang’s Demurrer to Cross-Complainant Trotta Tires II, LLC’s Second Amended Cross-Complaint

Respondent: Cross-Complainant Trotta Tires II, LLC

TENTATIVE RULING

Cross-Defendants Horizon Tire, Inc., Brian Han, and Vivienne Wang’s Demurrer to Cross-Complainant Trotta Tires II, LLC’s Second Amended Cross-Complaint is OVERRULED.

Cross-Defendants Horizon Tire, Inc., Brian Han, and Vivienne Wang are ordered to file an answer to the Second Amended Cross-Complaint in ten (10) days.

BACKGROUND

This is a breach of contract action arising from a credit agreement. On March 26, 2019, Horizon Tire, Inc. (Horizon Tire) entered into a written agreement with Trotta Tires II, LLC (Trotta Tires) in which Horizon Tire agreed to extend credit to Trotta Tires for the purchase of tires. Horizon Tire alleges Trotta Tires breached the agreement by failing to make payments pursuant to the agreement, starting September 16, 2021, and currently owes $458,661.66.

On June 15, 2022, Horizon Tire filed a complaint against Trotta Tires and Does 1-100, alleging the following causes of action: (1) breach of written contract, (2) common counts, (3) account stated, and (4) open book account. On August 24, Trotta Tires demurred to Horizon Tire’s complaint. On October 7, Horizon Tire responded by filing a First Amended Complaint (FAC) against the same defendants that omitted the second cause of action for common counts.

On November 14, 2022, Trotta Tires (Cross-Complainant) filed a cross-complaint against Horizon Tire, Vivienne Wang (Wang), Brian Han (Han, collectively, Cross-Defendants), and Roes 1-100, alleging the following causes of action: (1) declaratory relief, (2) declaratory relief, (3) negligence, and (4) fraud.

On January 3, 2023, Cross-Complainant filed a First Amended Cross-Complaint (FACC) against the same parties alleging the same causes of action. On March 6, the court sustained Cross-Defendants’ demurrer to Cross-Complainant’s FACC with leave to amend.

On March 27, 2023, Cross-Complainant filed a Second Amended Cross-Complaint (SACC) against the same parties alleging (1) declaratory relief, (2) negligent misrepresentation, and (3) fraud.

On April 26, 2023, Cross-Defendants filed the present demurrer. Prior to filing on April 3, Cross-Defendants’ counsel met and conferred telephonically with Cross-Complainant’s counsel and was unable to reach a resolution. (Neer Decl., ¶ 2.)

A hearing on the demurrer is set for May 24, 2023, with a mandatory settlement conference on October 5 and a post-mediation status conference/further case management conference on October 18.

ANALYSIS

Cross-Defendants demur to Cross-Complainant’s entire SACC. For the following reasons, the court OVERRULES the demurrer.

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.)

Declaratory Relief (First Cause of Action)

Cross-Defendants argue Cross-Complainant’s first cause of action for declaratory relief fails to plead sufficient facts to state a claim. The court disagrees.

Legal Standard

“To qualify for declaratory relief, a party would have to demonstrate its action presented two essential elements: (1) a proper subject of declaratory relief, and (2) an actual controversy involving justiciable questions relating to the party’s rights or obligations.” (Jolley v. Chase Home Finance, LLC (2013) 213 Cal.App.4th 872, 909, quotation marks and brackets omitted.) “The courts do not issue advisory opinions about the rights and duties of the parties under particular agreements, if no actual, justiciable controversy has yet developed.” (Otay Land Co. v. Royal Indemnity Co. (2008) 169 Cal.App.4th 556, 563.)

Discussion

In this case, Cross-Defendants argue declaratory relief is not proper here because there is not a present controversy as this case involves previous wrongs. In response, Cross-Complainant argues the purpose of declaratory relief here is to determine if Cross-Complainant has the right to be indemnified during these proceedings. In reply, Cross-Defendants argues this is an improper attempt to receive an advisory opinion on whether Cross-Complainant can seek indemnity. However, the court disagrees as declaratory relief in a cross-complaint is in fact the proper means for seeking indemnity. (Valley Circle Estates v. VTN Consolidated, Inc. (1983) 33 Cal.3d 604, 612 [“[A] cross-complaint for indemnity properly takes the form, adopted by defendant in the present case, of an action for declaratory relief.”]).

Thus, because there is a present controversy over whether Cross-Complainant is entitled to indemnity and that issue is a proper subject for declaratory relief, the court OVERRULES Cross-Defendants’ demurrer to this cause of action.

Negligent Misrepresentation and Fraud (Second and Third Causes of Action)

Cross-Defendants contend Cross-Complainant’s second cause of action for negligent misrepresentation and third cause of action for fraud fail to plead sufficient facts to state a claim. The court disagrees.

Legal Standard

“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 (Lazar), 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.) Similarly, “[t]he elements of negligent misrepresentation are ‘(1) the misrepresentation of a past or existing material fact, (2) without reasonable ground for believing it to be true, (3) with intent to induce another’s reliance on the fact misrepresented, (4) justifiable reliance on the misrepresentation, and (5) resulting damage.’” (National Union Fire Ins. Co. of Pittsburg, PA v. Cambridge Integrated Services Group, Inc. (2009) 171 Cal.App.4th 35, 50 (National Union), quoting Apollo Capital Fund LLC v. Roth Capital Partners, LLC (2007) 158 Cal.App.4th 226, 243.)

Discussion

In this case, the SACC alleges Cross-Defendants sent Cross-Complainant an email on October 15, 2021, with wiring instructions for Cross-Complainant to make payments for Horizon Tire to a Capital One bank account. (SACC, ¶ 9.) The wiring instructions were confirmed by two additional emails on November 1 and 3. (SACC, ¶ 9.) The SACC then alleges that these communications were misrepresentations as Horizon Tire did not have a Capital One bank account. (SACC, ¶ 12, 22.) In their demurrer, Cross-Defendants contend these allegations are contradicted by the copies of the actual email communications attached to the FACC. Specifically, they claim the emails did not come from “horizontire.com,” Cross-Defendants’ alleged email domain name, and instead came from “horlzontire.com,” an alleged unknown third party with an email domain name that was similar to Cross-Defendants’.

In reviewing a complaint, the court gives it “a reasonable interpretation and treat[s] the demurrer as admitting all material facts properly pleaded that are not inconsistent with other allegations, exhibits, or judicially noticed facts.” (Morris v. JPMorgan Chase Bank, N.A. (2022) 78 Cal.App.5th 279, 292.)

Here, the court finds the SACC’s allegations are not inconsistent with the attached email exhibits for two reasons. First, the court is unaware of any allegation in the SACC or judicially noticeable fact that establishes “horizontire.com” as Cross-Defendants’ email domain name. Second, the court is unaware of any allegation in the SACC or judicially noticeable fact that establishes the “horlzontire.com” email domain name is owned by an unknown third party as Cross-Defendants claim in their demurrer. Thus, because the court must accept the SACC’s well-pleaded allegations as true, Cross-Defendants’ contrary allegations have no merit. While Cross-Defendants remain free to introduce evidence later on that establishes they did not send these emails, a determination of such issues of fact is not proper in proceedings on a demurrer.

Accordingly, Cross-Defendants’ demurrer to Cross-Complainant’s second and third causes of action is OVERRULED.

CONCLUSION

Based on the foregoing, Cross-Defendants’ demurrer to Cross-Complainant’s SACC is OVERRULED.

Cross-Defendants Horizon Tire, Inc., Brian Han, and Vivienne Wang are ordered to file an answer to the Second Amended Cross-Complaint in ten (10) days.