Judge: Shirley K. Watkins, Case: 22VECV01520, Date: 2022-12-13 Tentative Ruling

Case Number: 22VECV01520    Hearing Date: December 13, 2022    Dept: T

            [TENTATIVE] ORDER:  Defendant Central Ford Automotive, Inc’s Demurrer to the Complaint is SUSTAINED WITHOUT LEAVE TO AMEND AS TO THE 4TH CAUSE OF ACTION.  Answer must be filed within 20 days.

Introduction

            Defendant Central Ford Automotive, Inc. (Defendant) demurred to Plaintiff Martha Michel-Aquino and Pedro Aquino (Plaintiffs) Complaint.  Defendant placed into issue the only cause of action (COA) alleged against it, the fourth COA for negligent repair.

            Discussion 

            Defendant argued that the negligence COA is barred by the Economic Loss Rule.  “Simply stated, the economic loss rule provides: ‘[W]here a purchaser's expectations in a sale are frustrated because the product he bought is not working properly, his remedy is said to be in contract alone, for he has suffered only ‘economic’ losses.'”   (Robinson Helicopter Co. v. Dana Corp. (2004) 34 Cal.4th 979, 988.)  The rule “requires a purchaser to recover in contract for purely economic loss due to disappointed expectations, unless he can demonstrate harm above and beyond a broken contractual promise.” (Id.)  Only four exceptions have been recognized to date: (1) where a breach of duty directly causes physical injury; (2) a breach of the covenant of good faith and fair dealing in insurance contracts; (3) for wrongful discharge in violation of fundamental public policy; or (4) where the contract was fraudulently induced.  (Erlich v. Menezes (1999) 21 Cal.4th 543, 551-52.)  “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.”  (Id.) 

Defendant cited to North American Chemical Co. v. Superior Court (1991) 59 Cal.App.4th 764 (North American) to argue that the Economic Loss Rule does not apply to service contracts.  Despite Plaintiffs’ contention otherwise, the Economic Loss Rule has been applied to service contracts.  (J’Aire Corp. v. Gregory (1979) 24 Cal.3d 799 [contractor hired to remodel leased premises;] Erlich v. Menezes (1999) 21 Cal.4th 543 [contract for the construction of homes.])  Defendant argued, with several citations to legal authority, that the North American case has been largely ignored or distinguished by subsequent opinions of the California Supreme Court.  (Peregrine Pharmaceuticals, Inc. v. Clinical Supplies Mgmt., Inc., (C.D. Cal. June 22, 2015) 2015 WL 13309286, *6.)  The Court finds Defendant’s argument and legal authority persuasive and does not agree that the Economic Loss Rule is inapplicable to service contracts.  Plaintiffs’ Complaint and arguments fail to present facts showing that the claim is nothing more than a claim for negligent breach of contract.  Plaintiffs do not present facts/argument to show that any of the four exceptions apply to this case.  The Court applies the Economic Loss Rule to this action and finds the COA barred. 

            Defendant also argued that there are insufficient facts to support damages.  Aside from the warranty claims related to the vehicle’s “transmission, electrical, brakes, recall, and engine” (Compl. par. 16,) Plaintiffs fail to plead facts as to how they were damaged by Defendant.  On this defect, the demurrer is further persuasive. 

The Demurrer to the fourth COA is SUSTAINED WITHOUT LEAVE TO AMEND.