Judge: Salvatore Sirna, Case: 23PSCV02066, Date: 2024-01-22 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 a tentative ruling by calling the clerk in Department G at (909) 802-1104 prior to 8:30 a.m. the morning of the hearing.
Case Number: 23PSCV02066 Hearing Date: January 22, 2024 Dept: G
Defendants Lively Root Technologies
Inc. and Colin Barceloux’s Demurrer to Complaint of Plaintiff Grower Direct
Supply, Inc.
Respondent: Plaintiff Grower Direct Supply, Inc.
Defendants Lively Root Technologies Inc. and Colin Barceloux’s Motion to Strike Portions of Complaint of Plaintiff Grower Direct Supply, Inc.
Respondent: Plaintiff Grower Direct Supply, Inc.
TENTATIVE RULING
Defendants Lively Root Technologies Inc. and Colin Barceloux’s Demurrer to Complaint of Plaintiff Grower Direct Supply, Inc. is SUSTAINED with twenty (20) days leave to amend as the second cause of action and OVERRULED as to the first cause of action.
Defendants Lively Root Technologies Inc. and Colin Barceloux’s Motion to Strike Portions of Complaint of Plaintiff Grower Direct Supply, Inc. is deemed MOOT.
BACKGROUND
This is an action for breach of contract and fraud arising from the sale of horticulture products. Plaintiff Grower Direct Supply Inc. (GDS) is a California corporation engaged in the development and sale of horticulture products. In 2022 and 2023, GDS alleges Defendants Lively Root Technologies Inc. (LRT) and Colin Barceloux ordered $263,826.38 in horticulture products from GDS. Subsequently, GDS alleges LRT and Barceloux failed to pay the amount owed for the products.
On July 10, 2023, GDS filed a complaint against LRT, Barceloux, and Does 1-10, alleging (1) breach of contract and (2) fraud.
On December 5, 2023, LRT and Barceloux filed the present demurrer and motion to strike. Prior to filing on September 11, their counsel met and conferred telephonically with GDS’s counsel and was unable to reach a resolution. (Park Decl., ¶ 3.)
A hearing on the demurrer and motion to strike is set for January 22, 2024, along with a case management conference.
ANALYSIS
LRT and Barceloux demur to GDS’s entire Complaint. For the following reasons, the court SUSTAINS LRT and Barceloux’s demurrer to the second cause of action with leave to amend and OVERRULES their demurrer to the first cause of action.
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.)
Breach of Contract (First Cause of Action)
LRT and Barceloux argue GDS’s first cause of action for breach of contract fails to plead sufficient facts to state a claim. The court disagrees.
Legal Standard
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.) 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.)
Discussion
In this case, LRT and Barceloux argue the Complaint fails to allege if the alleged contract was written, oral, or implied. They also argue the Complaint fails to allege the terms of the contract or provide a copy of it. In opposition, GDS argues the allegations of the Complaint and exhibits containing invoices establish the existence of an implied-in-fact contract.
“An implied contract is one, the existence and terms of which are manifested by conduct.” (Civ. Code, § 1621.) It “arises from the request of one party . . . and performance by the other . . ., though the request is often inferred from the circumstances attending the performance.” (People v. Randono (1973) 32 Cal.App.3d 164, 174 (Randono). “In pleading a cause of action on an agreement implied from conduct[,] only the facts from which the promise is implied must be alleged.” (Youngman v. Nevada Irr. Dist. (1969) 70 Cal.2d 240, 246-247.)
Here, GDS alleges LRT and Barceloux ordered $263,826.38 in horticulture products from GDS. (Complaint, ¶ 8.) The Complaint also provides four different invoices for these products that were addressed to LRT. (Complaint, Ex. A.) And the Complaint alleges GDS fully performed by providing all of the product ordered. (Complaint, ¶ 9.) “When goods are ordered by one dealer from another in the ordinary course of business, the law will imply a promise to pay.” (Randono, supra, 32 Cal.App.3d at p. 174.) Thus, by alleging the above facts, the Complaint has adequately alleged the existence of an implied contract between LRT and GDS for the purchase of horticulture products. Last, GDS alleges LRT breached the contract by refusing to make any payments for the goods purchased. (Complaint, ¶ 10.)
While LRT is the only party listed on the invoices, the Complaint alleges LRT is the alter ego of Barceloux. (Complaint, ¶ 4.) But Barceloux argues the Complaint fails to adequately plead these alter ego allegations. “Two requirements must be met to invoke the alter ego doctrine: (1) ‘[T]here must be such a unity of interest and ownership between¿the corporation and its equitable owner that the separate personalities of the corporation and the shareholder do not in reality exist’; and (2) ‘there must be an¿inequitable result¿if the acts in question are treated as those of the corporation alone.’” (Turman v. Superior Court of Orange County (2017) 17 Cal.App.5th 969, 980-981, quoting Sonora Diamond Corp. v. Superior Court (2000) 83 Cal.App.4th 523, 538.) When making alter ego allegations, pleading with particularity is not required as a Plaintiff need only allege “ultimate rather than evidentiary facts.” (Rutherford Holdings, LLC v. Plaza del Rey (2014) 223 Cal.App.4th 221, 236, quoting Burks v. Poppy Construction Co. (1962) 57 Cal.2d 463, 474.)
Here, the Complaint alleges LRT is a “mere shell, instrumentality, and conduit through which Defendants [Barceloux] and [LRT] carried on their business.” (Complaint, ¶ 3.) The Complaint also alleges Barceloux exercises “complete control and dominance” over LRT to the point that any individuality or separateness between the two does not exist. (Complaint, ¶ 3.) Last, the Complaint alleges an unjust result would occur if LRT is treated as a distinct entity. (Complaint, ¶ 4.) Based on these allegations, the Complaint adequately alleges LRT is Barceloux’s alter ego.
Accordingly, LRT and Barceloux’s demurrer to this cause of action is OVERRULED.
Fraud (Second Cause of Action)
LRT and Barceloux contend GDS’s second cause of action for fraud fails to plead sufficient facts to state a claim. The court agrees.
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, 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.)
Discussion
In this case, LRT and Barceloux contend the Complaint fails to allege they made misrepresentations with the required specificity. In alleging a cause of action for fraud, “[t]he specificity requirement means a plaintiff must allege facts showing how, when, where, to whom, and by what means the representations were made, and, in the case of a corporate defendant, the plaintiff must allege the names of the persons who made the representations, their authority to speak on behalf of the corporation, to whom they spoke, what they said or wrote, and when the representation was made.” (West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 793.)
Here, the Complaint generally alleges that defendants made material misrepresentations by assuring GDS that GDS would be paid. (Complaint, ¶ 14-15.) But the Complaint fails to specify which defendant made these representations, how these representations were made, where these representations were made, when these representations were made, and to whom these representations were made. Furthermore, these alleged assurances appear to be promises of future conduct which do not qualify as actionable misrepresentations. (See San Francisco Design Center Associates v. Portman Companies (1995) 41 Cal.App.4th 29, 44 [“[A]n actionable misrepresentation must be made about past or existing facts; statements regarding future events are merely deemed opinions.”].) To the extent these assurances could qualify as false promises, the Complaint fails to specifically allege that LRT and Barceloux had no intention of fulfilling the promise to pay GDS. (Magpali v. Farmers Group, Inc. (1996) 48 Cal.App.4th 471, 481 [“A promise of future conduct is actionable as fraud only if made without a present intent to perform.”].) While the Complaint does allege LRT and Barceloux knew they were presently experiencing financial difficulties, it does not specifically allege they had no intention of performing their promises in the future.
In addition to alleging LRT and Barceloux made misrepresentations, the Complaint also alleges they concealed the fact that they were presently unable to make payments on purchased product. (Complaint, ¶ 14.) “[T]he elements of a cause of action for fraud based on concealment are: ‘(1) the defendant must have concealed or suppressed a material fact, (2) the defendant must have been under a duty to disclose the fact to the plaintiff, (3) the defendant must have intentionally concealed or suppressed the fact with the intent to defraud the plaintiff, (4) the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact, and (5) as a result of the concealment or suppression of the fact, the plaintiff must have sustained damage.’” (Kaldenbach v. Mutual of Omaha Life Ins. Co. (2009) 178 Cal.App.4th 830, 850, quoting Roddenberry v. Roddenberry (1996) 44 Cal.App.4th 634, 665-666.)
Here, the Complaint fails to allege that GDS was unaware LRT and Barceloux were financially unstable. The Complaint also fails to allege that GDS would not have sold the horticulture products to LRT and Barceloux had they known their financial position. Thus, the Complaint fails to adequately allege facts constituting fraud.
Accordingly, LRT and Barceloux’s demurrer to this cause of action is SUSTAINED with leave to amend.
CONCLUSION
Based on the foregoing, LRT and Barceloux’s demurrer to GDS’s Complaint is SUSTAINED with twenty (20) days leave to amend as to the second cause of action and OVERRULED as to the first cause of action.
Based upon the recommendations made on the demurrer, LRT and Barceloux’s motion to strike portions of GDS’s Complaint is deemed MOOT.