Judge Salvatore Sirna, Case Number: 23PSCV02419, Date: 2023-10-11 Tentative Ruling

Judge: Salvatore Sirna, Case: 23PSCV02419, Date: 2023-10-11 Tentative Ruling

Case Number: 23PSCV02419 Hearing Date: October 11, 2023 Dept: G

Defendants Ford Motor Company and Puente Hills Ford’s Demurrer to Plaintiff’s Complaint

Respondent: Plaintiff Jasmin Davila

TENTATIVE RULING

Defendants Ford Motor Company and Puente Hills Ford’s Demurrer to Plaintiff’s Complaint is SUSTAINED with ten (10) days leave to amend as to the sixth cause of action and OVERRULED as to the fifth cause of action.

BACKGROUND

This is a lemon law action. In May 2020, Plaintiff Jasmin Davila allegedly entered into a warranty contract with Defendant Ford Motor Company (Ford) by purchasing a 2020 Ford Explorer. Subsequently, Davila alleges the vehicle exhibited defects with its engine, transmission, and electrical system.

On August 8, 2023, Davila filed a complaint against Ford, Puente Hills Ford, and Does 1-10, alleging the following causes of action: (1) violation of Civil Code section 1793.2, subdivision (d); (2) violation of Civil Code section 1793.2, subdivision (b); (3) violation of Civil Code section 1793.2, subdivision (a)(3); (4) breach of implied warranty of merchantability, (5) fraudulent inducement by concealment, (6) negligent repair, and (7) violation of the Magnuson-Moss Warranty Act.

On September 8, 2023, Ford and Puente Hills Ford (collectively, Ford Defendants) filed the present demurrer. Prior to filing on September 7, the Ford Defendants’ counsel met and conferred telephonically with Davila’s counsel and was unable to reach a resolution. (Liu Decl., ¶ 3, Ex. D.)

A hearing on the demurrer is set for October 11, 2023. A case management conference is also set for January 16, 2024, along with an OSC Re: Failure to File Proof of Service.

ANALYSIS

The Ford Defendants demur to Davila’s fifth cause of action (concealment) and sixth cause of action (negligent repair). For the following reasons, the court SUSTAINS Defendants’ demurrer to Davila’s sixth cause of action with leave to amend and OVERRULES Defendants’ demurrer to Davila’s fifth 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.)

Concealment (Fifth Cause of Action)

Ford argues Davila’s fifth cause of action for fraudulent inducement through concealment is insufficiently pled and barred by the economic loss rule. The court disagrees.

The court first addresses Ford’s contention that Davila’s fraudulent inducement claim is barred by the economic loss rule, which prevents tort recovery for “‘purely economic losses,’ meaning financial harm unaccompanied by physical or property damage.” (Sheen v. Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905, 922.) Economic loss can also include “damages for inadequate value, costs of repair and replacement of the defective product or consequent loss of profits.” (Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 988 (Robinson), quoting Jimenez v. Superior Court (2002) 29 Cal.4th 473, 482.)

In this case, Ford argues the economic loss rule applies even when breach of contract is accomplished in a fraudulent manner and for support, citing a series of federal district court decisions. These decisions, however, are not binding on this court, and the court need not consider their holdings since there is binding precedent from the Court of Appeal on this exact issue.

In Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 828 (Dhital), the court rejected similar arguments and held the economic loss rule does not bar the tort of fraudulent inducement by concealment “because a defendant’s conduct in fraudulently inducing someone to enter a contract is separate from the defendant’s later breach of the contract or warranty provisions that were agreed to.” (Id., at p. 725.)

Here, the court finds applicable the analysis in Dhital. Like the plaintiff in Dhital, Davila alleges presale misconduct in that Ford knew Davila’s vehicle was defective before it was sold and did not disclose the defects to Davila. (Id., at p. 725-726; Complaint, ¶ 25-26, 36.) Because Davila alleges fraudulent inducement, the court does not find persuasive Ford’s argument that the economic loss rule applies here. The court next considers whether Davila pled sufficient facts to state a cause of action for fraudulent inducement by concealment.

“[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.) Furthermore, 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.)

Here, Ford first argues Davila failed to allege the defect that Ford allegedly concealed. In the Complaint, Davila alleges Ford knew that the vehicles at issue had transmission defects which resulted in hesitation, delayed acceleration, harsh or hard shifting, jerking, shuddering, or juddering. (Complaint, ¶ 25.) Davila also alleges Ford actively concealed the existence and nature of the defects from Davila at the time of purchase and repair. (Complaint, ¶ 36.) While Ford attempts to undermine these allegations by claiming they merely demonstrate how the transmissions may be defective, Davila’s actual allegation does not contain such tentative language. Thus, the court finds these allegations sufficiently alleged.

Next, Ford contends Davila failed to allege facts establishing Ford was under a duty to disclose the allegedly concealed facts. One party’s failure to disclose material facts unknown to another party is not fraud “unless there is some relationship between the parties which gives rise to a duty to disclose such known facts.” (LiMandri v. Judkins (1997) 52 Cal.App.4th 326, 337, quoting BAJI No. 12.36 (8th ed. 1994.) “In transactions which do not involve fiduciary or confidential relations, a cause of action for non-disclosure of material facts may arise in at least three instances: (1) the defendant makes representations but does not disclose facts which materially qualify the facts disclosed, or which render his disclosure likely to mislead; (2) the facts are known or accessible only to defendant, and defendant knows they are not known to or reasonably discoverable by the plaintiff; (3) the defendant actively conceals discovery from the plaintiff.” (Warner Constr. Corp. v. City of Los Angeles (1970) 2 Cal.3d 285, 294.)

In this case, Davila alleges Ford was under a duty to disclose because it had knowledge of defects through sources unavailable to Davila including “including but not limited to pre-production testing data, early consumer complaints about the transmission defect made directly to [Ford] and its network of dealers, aggregate warranty data compiled from [Ford’s] network of dealers, testing conducted by [Ford] in response to these complaints, as well as warranty repair and part replacements data received by [Ford] from [Ford’s] network of dealers, amongst other sources of internal information.” (Complaint, ¶ 61.) Davila also alleges Davila “could not reasonably have been expected to learn or discover of the Vehicle’s Transmission Defect and its potential consequences until well after [Davila] purchased the Vehicle.” (Complaint, ¶ 64(d).)

In response, Ford contends Davila failed to plead what the testing revealed. But Davila does allege so, stating Ford acquired its knowledge of the transmissions defect from sources including such testing data. (Complaint, ¶ 61.) To the extent Ford is demanding Davila allege the exact results of those tests, the court finds such specificity is not required where “the allegations indicate that ‘the defendant must necessarily possess full information concerning the facts of the controversy’” (Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 158, quoting Bradley v. Hartford Acc. & Indem. Co. (1973) 30 Cal.App.3d 818, 825) or if “the facts lie more in the knowledge of the opposite party.” (Ibid, quoting Turner v. Milstein (1951) 103 Cal.App.2d 651, 658.)

Finally, Ford contends Davila failed to allege a connection between issues raised in consumer complaints and Davila’s own vehicle. But again, such specificity is unnecessary where Davila has alleged Ford acquired knowledge of the defect from these complaints and where the contents of such complaints lie more in the knowledge of Ford. Last, to the extent Ford contests its knowledge and the existence of such transmission defects, such contentions are inappropriate at the demurrer stage where Davila’s well-pleaded allegations are deemed true.

Accordingly, the court OVERRULES Ford’s demurrer to this cause of action.

Negligent Repair (Sixth Cause of Action)

Puente Hills Ford contends Davila’s sixth cause of action for negligent repair is barred by the economic loss rule and fails to allege damages. The court agrees it is barred by the economic loss rule.

As noted in the previous section, the economic loss rule bars tort recovery for “purely economic losses.” (Sheen, supra, 12 Cal.5th at p. 905.) This is because “conduct amounting to a breach of contract becomes tortious only when it also violates a duty independent of the contract arising from principles of tort law.” (Erlich v. Menezes (1999) 21 Cal.4th 543, 551.) In this case, Davila alleges Puente Hills Ford owed Davila a duty “to use ordinary care and skill in storage, preparation and repair of the Subject Vehicle in accordance with industry standards.” (Complaint, ¶ 74.) But it is unclear whether Puente Hills Ford’s duty to repair Davila’s vehicle is contractual or based on an independent duty. When it is unclear if an action arises from a contract or noncontractual duty, “the action will be considered based on contract rather than tort.” (Arthur L. Sachs, Inc. v. City of Oceanside (1984) 151 Cal.App.3d 315, 322.) Thus, because Davila’s negligent repair action is based on a contractual duty to repair and Davila has not alleged any facts establishing an independent noncontractual duty, Davila’s sixth cause of action is barred by the economic loss rule.

Davila contends there is an exception to the economic loss rule for negligently performed professional services contracts. Indeed, such an exception does exist to ensure “that the consumer receives the services the professional agreed to provide.” (Sheen, supra, 12 Cal.5th at p. 933.) “In such settings, professionals generally agree to provide ‘careful efforts’ in rendering contracted-for services, but ‘most clients do not know enough to protect themselves by inspecting the professional’s work or by other independent means.’” (Ibid, quoting Rest.3d Torts, Liability for Economic Harm (June 2020) § 4, com. a., p. 22.) Such professional services can include those offered by doctors, attorneys, accountants, and stockbrokers. (See Neel v. Magana, Olney, Levy, Cathcart & Gelfand (1971) 6 Cal.3d 176, 188.) But Davila fails to provide any binding authority that holds these types of professional services contracts include vehicle repair.

Davila also relies on Jimenez v. Superior Court (2002) 29 Cal.4th 473, which holds “California decisional law has long recognized that the economic loss rule does not necessarily bar recovery in tort for damage that a defective product (e.g., a window) causes to other portions of a larger product (e.g., a house) into which the former has been incorporated.” (Id., at p. 483.) Here however, Davila fails to allege that Puente Hills Ford’s failure to repair transmission issues caused damage to other subcomponents of the vehicle.

Accordingly, Puente Hills Ford’s demurrer to Davila’s sixth cause of action is SUSTAINED with leave to amend.

CONCLUSION

Based on the foregoing, Ford and Puente Hills Ford’s demurrer to Davila’s Complaint is SUSTAINED with 10 days’ leave given to amend as to the sixth cause of action and OVERRULED as to the fifth cause of action.