Judge Salvatore Sirna, Case Number: 23PSCV03822, Date: 2024-11-13 Tentative Ruling

Judge: Salvatore Sirna, Case: 23PSCV03822, Date: 2024-11-13 Tentative Ruling

Case Number: 23PSCV03822 Hearing Date: November 13, 2024 Dept: G

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

Respondent: Plaintiffs Sylvia V Ramirez and Osvaldo Huizar

TENTATIVE RULING

Defendants Ford Motor Company and Puente Hills Ford’s Demurrer to Plaintiffs’ Complaint¿is SUSTAINED IN PART with twenty (20) days leave to amend as to the sixth cause of action and OVERRULED IN PART as to the fifth cause of action.

BACKGROUND

This is a Song-Beverly action. In January 2020, Plaintiffs Sylvia V Ramirez and Osvaldo Huizar allegedly entered into a warranty contract with Defendant Ford Motor Company (Ford) with regards to a 2019 Ford F150. Subsequently, Ramirez and Huizar allege the vehicle exhibited defects with its engine, transmission, and electrical system.

On December 8, 2023, Ramirez and Huizar 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, and (6) negligent repair.

On January 12, 2024, Ford and Puente Hills Ford (collectively, the Ford Defendants) filed the present demurrer. Prior to filing, the Ford Defendants’ counsel met and conferred telephonically with Ramirez and Huizar’s counsel and was unable to reach a resolution. (Liu Decl., ¶ 3, Ex. D.) On March 5, 2024, the court stayed proceedings on the demurrer pending proceedings before the California Supreme Court on similar legal issues.

A hearing on the present demurrer is set for November 13, 2024, along with a case management conference and OSC Re: Sanctions for Defendant’s Failure to Appear.

ANALYSIS

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

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

Economic Loss Rule

Pursuant to the economic loss rule, “there is no recovery in tort for negligently inflicted ‘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.) It “functions to bar claims in negligence for pure economic losses in deference to a contract between litigating parties.” (Id., at p. 922.) “Tort damages have been permitted in contract cases where a breach of duty directly causes physical injury [Citation]; for breach of the covenant of good faith and fair dealing in insurance contracts [Citation]; for wrongful discharge in violation of fundamental public policy [Citation]; or where the contract was fraudulently induced. [Citation.] In each of these cases, the duty that gives rise to tort liability is either completely independent of the contract or arises from conduct which is both intentional and intended to harm.” (Erlich v. Menezes (1999) 21 Cal.4th 543, 551-552.)¿ If fraud occurs independent of a breach of contract, the economic loss rule does not apply. (See Robinson v. Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 991.) For example, fraudulent misrepresentations made to induce a party to enter into an agreement are not barred because they are independent of that breach of contract. (Id., at p. 991.) And no distinction is made with regards to whether the act of fraud was an affirmative representation or concealment of material facts. (See Rattagan v. Uber Technologies, Inc. (2024) 17 Cal.5th 1, 39 (Rattagan).)

The Ford Defendants argue Ramirez and Huizar’s cause of action fails because it is based on alleged concealment as opposed to affirmative misrepresentations. But as noted above, Rattagan has since rejected this requirement. The Ford Defendants also argue Ramirez and Huizar failed to adequately plead the fraudulent inducement exception to the economic loss rule. Specifically, the Ford Defendants argue Ramirez and Huizar failed to allege that Ford did not intend to honor its warranty obligations as required by Food Safety Net Services v. Eco Safe Systems USA, Inc. (2012) 209 Cal.App.4th 1118, 1131. There, the court noted “[t]o establish a claim of fraudulent inducement, one must show that the defendant did not intend to honor its contractual promises when they were made.” (Id., at p. 1131.) But this is not the correct standard here as Ramirez and Huizar did not allege Ford made a false promise or false representation. Rather, Ramirez and Huizar have alleged Ford concealed material facts—transmission defects—from Ramirez and Huizar. (Complaint, ¶ 36.) And as demonstrated below, the court finds Ramirez and Huizar have adequately pled a cause of action for concealment.

Sufficiency of Concealment Allegations

“[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.)

One party’s failure to disclose material facts unknown to another party is not fraud unless “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.)

Here, the Ford Defendants first argue Ramirez and Huizar failed to allege the defect that Ford allegedly concealed. In the Complaint, Ramirez and Huizar 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.) Ramirez and Huizar also allege Ford actively concealed the existence and nature of the defects from Ramirez and Huizar at the time of purchase and repair. (Complaint, ¶ 36.) While the Ford Defendants attempt to undermine these allegations by claiming they merely demonstrate how the transmissions may be defective, Ramirez and Huizar’s actual allegation does not contain such tentative language. Thus, the court finds these allegations are sufficiently alleged.

Next, the Ford Defendants contend Ramirez and Huizar failed to allege facts establishing Ford was under a duty to disclose allegedly concealed facts. Ramirez and Huizar allege Ford was under a duty to disclose because it had knowledge of defects through sources unavailable to Ramirez and Huizar including “including but not limited to pre-production and post-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 warranty repair and part replacements data received by [Ford] from [Ford]’s network of dealers, amongst other sources of internal information.” (Complaint, ¶ 61.) Ramirez and Huizar also allege they “could not reasonably have been expected to learn or discover of the Vehicle's Transmission Defect and its potential consequences until well after [Ramirez and Huizar] purchased the Vehicle.” (Complaint, ¶ 64(d).)

In response, the Ford Defendants contend Ramirez and Huizar failed to plead what the testing revealed. But Ramirez and Huizar do allege so, stating Ford acquired its knowledge of the transmissions defect from sources including such testing data. (Complaint, ¶ 61.) To the extent the Ford Defendants are demanding Ramirez and Huizar allege the exact results of those tests, 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.)

The Ford Defendants also contend Ramirez and Huizar failed to allege a connection between issues raised in consumer complaints and the subject vehicle. But again, such specificity is unnecessary where Ramirez and Huizar have alleged Ford acquired knowledge of the defect from these complaints and where the contents of such complaints lie more in the knowledge of Ford. To the extent Ford contests its knowledge and the existence of such transmission defects, such contentions are inappropriate at the demurrer stage where Ramirez and Huizar’s well-pleaded allegations are deemed true.

Last, the Ford Defendants maintain Ramirez and Huizar have failed to allege a direct transactional relationship between Ford and Ramirez and Huizar. But Ramirez and Huizar have done so by alleging Ford entered into a warranty contract with them. (Complaint, ¶ 9-10.) Express warranties are contractual in nature. (See Hauter v. Zogarts (1975) 14 Cal.3d 104, 117.) Because the Ford Defendants do not address this or point to any authority holding express warranties are insufficient to create a relationship between the parties, this argument also fails.

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

Negligent Repair (Sixth Cause of Action)

Puente Hills Ford contends Ramirez and Huizar’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, Ramirez and Huizar allege Puente Hills Ford owed Ramirez and Huizar 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 the subject 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 Ramirez and Huizar’s negligent repair action is based on a contractual duty to repair and Ramirez and Huizar have not alleged any facts establishing an independent noncontractual duty, Ramirez and Huizar’s sixth cause of action is barred by the economic loss rule.

Ramirez and Huizar contend 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 Ramirez and Huizar fail to provide any binding authority that holds these types of professional services contracts include vehicle repair.

Ramirez and Huizar also rely 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, Ramirez and Huizar fail 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 Ramirez and Huizar’s sixth cause of action is SUSTAINED with leave to amend.

CONCLUSION

Based on the foregoing, the Ford Defendants’ demurrer to Ramirez and Huizar’s Complaint is SUSTAINED IN PART with twenty (20) days leave to amend as to the sixth cause of action and OVERRULED IN PART as to the fifth cause of action.