Judge: Stephen P. Pfahler, Case: 21CHCV00339, Date: 2023-03-01 Tentative Ruling


Case Number: 21CHCV00339    Hearing Date: March 1, 2023    Dept: F49

Dept. F-49

Date: 3-1-23

Case #: 21CHCV00339

Trial Date: 8-7-23 c/f 2-6-23

 

DEMURRER

 

MOVING PARTY: Defendant, Colt LED

RESPONDING PARTY: Plaintiff, Laysion, LLC

 

RELIEF REQUESTED

Demurrer to the First Amended Complaint

·         2nd Cause of Action: Fraud – Civil Code section 1572(3)

·         3rd Cause of Action: Conversion

 

SUMMARY OF ACTION

Between March 2019 and April 2021, Plaintiff Laysion, LLC alleges Defendants Guillermo Macias and Colt International Clothing, Inc. ordered one million dollars ($1,000,000) in certain lighting equipment. Defendants paid $210,000, and presented another $800,000 in checks, which were rejected for insufficient funds. Plaintiff alleges an outstanding balance of $790,000.

 

On April 30, 2021, Plaintiff filed its complaint for Breach of Contract, Common Counts, and Fraud. On August 19, 2021, Plaintiff filed a first amended complaint for Fraud – Civil Code section 1719, Fraud Civil Code section 1572(3), Conversion – Civil Code section 3336, Breach of Written Contract, Breach of Oral Contract, Account Stated –Sale and Delivery, Quantum Meruit, and Declaratory Relief – Constructive Trust.

 

On December 1, 2021, the court sustained the demurrer to the second and third causes of action for Fraud Civil Code section 1572(3), Conversion, and overruled the demurrer to the seventh cause of action for Quantum Meruit. The court found the motion to strike moot in part, and denied the remainder. Defendants answered the first amended complaint on January 18, 2022.

 

On February 4, 2022, the court denied Defendants’ motion to disqualify Plaintiff’s counsel. Defendants filed a notice of appeal on March 16, 2022. On July 21, 2022, the court granted Defendants leave to file an amended answer to the complaint.

 

RULING: Sustained without Leave.

Defendant Colt LED filed the instant demurrer to the second and third causes of action in the first amended complaint for Fraud – Civil Code section 1572(3), and Conversion. The demurrer is brought on grounds that Plaintiff lacks facts in support of the two claims. Plaintiff in opposition counters that the first amended complaint sufficiently articulates the two challenged claims, and requests the court “reexamine” the first amended complaint in “assessing the sufficiency” of the fraud claim. As for the conversion cause of action, the “facts have changed substantially,” which now supports the claim. Plaintiff also contends the demurrer lacks a sufficient meet and confer effort. Defendant in reply contends that Plaintiff “effectively dismissed” the second and third causes of action, when it represented to the court that it would not submit an amended pleading. The failure to amend the complaint effectively rendered the claims dismissed with prejudice. Defendant also contends the opposition constitutes an effort to seek a motion for reconsideration. Finally, Defendant reiterates the insufficient facts in support of the fraud claim, and lack of reliance. Defendants also challenge the lack of any responsive argument on the demurrer to the conversion claim.

 

On December 1, 2021, the court sustained the demurrer to the second and third causes of action for Fraud Civil Code section 1572(3), Conversion, and overruled the demurrer to the seventh cause of action for Quantum Meruit, and additionally overruled the demurrer to the alter ego allegations due to the finding of sufficiently pled elements. Defendants answered the first amended complaint on January 18, 2022.

 

The instant demurrer comes following the August 31, 2022, order whereby the court granted the motion to quash service of the summons and first amended complaint on defendant Colt LED. Plaintiff served Colt LED as an individual defendant. The demurrer now treats Colt LED as a separate entity, as alleged in paragraph four (4) of the first amended complaint, rather than as an alter ego of Defednants.

 

A demurrer is an objection to a pleading, the grounds for which are apparent from either the face of the complaint or a matter of which the court may take judicial notice. (Code Civ. Proc., § 430.30, subd. (a); see also Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) The purpose of a demurrer is to challenge the sufficiency of a pleading “by raising questions of law.” (Postley v. Harvey (1984) 153 Cal.App.3d 280, 286.) “In the construction of a pleading, for the purpose of determining its effect, its allegations must be liberally construed, with a view to substantial justice between the parties.” (Code Civ. Proc., § 452.) The court “ ‘ “treat[s] the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law . . . .” ’ ” (Berkley v. Dowds (2007) 152 Cal.App.4th 518, 525.) In applying these standards, the court liberally construes the complaint to determine whether a cause of action has been stated.  (Picton v. Anderson Union High School Dist. (1996) 50 Cal.App.4th 726, 733.)

 

“A demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures.” (Khoury v. Maly's of California, Inc. (1993) 14 Cal.App.4th 612, 616; Williams v. Beechnut Nutrition Corp. (1986) 185 Cal.App.3d 135, 139 [“[U]nder our liberal pleading rules, where the complaint contains substantive factual allegations sufficiently apprising defendant of the issues it is being asked to meet, a demurrer for uncertainty should be overruled or plaintiff given leave to amend.]

 

The court declines to consider any and all extrinsic evidence submitted in support of the opposition to the motion. The alleged lack of a meet and confer in no way bars a ruling on the merits of the demurrer.

 

2nd Cause of Action, Fraud – Civil Code section 1572(3): Sustained without Leave to Amend.

Defendants challenge the claim of concealment on grounds of uncertainty, and a lack of showing of any basis of justifiable reliance. Plaintiff relies on citation to extrinsic evidence, which is outside the court and scope of the demurrer, as provided in the standard. Nothing in the oppositions addresses the actual allegations pled in the operative complaint.

 

Civil Code section 1572 provides in relevant part: “Actual fraud, within the meaning of this Chapter, consists in any of the following acts, committed by a party to the contract, or with his connivance, with intent to deceive another party thereto, or to induce him to enter into the contract: [¶] 3. The suppression of that which is true, by one having knowledge or belief of the fact…” “‘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.) “[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.” (Bank of America Corp. v. Superior Court (2011) 198 Cal.App.4th 862, 870 [internal quotations omitted].)

 

The complaint depends on the allegation that “Defendants did not advise Plaintiff of said material facts [insufficient funds] prior to August 3, 2018, the date on which Plaintiff presented the NSF Check dated July 31, 2019 to Defendants bank.” [First Amend. Comp., ¶ 26.] Other than a simple conclusion of the knowing passing of an insufficiently funded check, the subject cause of action still lacks a sufficiently articulated basis of a duty to disclose. “There are ‘four circumstances in which nondisclosure or concealment may constitute actionable fraud: (1) when the defendant is in a fiduciary relationship with the plaintiff; (2) when the defendant had exclusive knowledge of material facts not known to the plaintiff; (3) when the defendant actively conceals a material fact from the plaintiff; and (4) when the defendant makes partial representations but also suppresses some material facts. [Citation.]’” (LiMandri v. Judkins (1997) 52 Cal.App.4th 326, 336.) In other words, the first amended complaint insufficiently articulates a claim separate and apart from the simple misrepresentation of the presentation of a check for payment as constituting a represented payment.

 

Defendant also correctly argues for the lack of any showing of reasonable reliance. The goods were already allegedly delivered on May 3, 2019. [First Amend. Comp., ¶ 15.] The agreement for delivery of the checks was not made until June 15, 2019. [First Amend. Comp., ¶ 16.]

 

The demurrer is sustained without leave to amend.

 

3rd Cause of Action, Conversion: Sustained without Leave to Amend.

Defendant challenges the subject claim on grounds that Defendant never actually exercised any wrongful dominion over the subject equipment purchased from Plaintiff in that title passed upon acceptance of delivery. Plaintiff in opposition again cites to extrinsic evidence outside the scope of the demurrer, and otherwise provides no defense to the actual pled allegations in the operative complaint.

 

“‘A cause of action for conversion requires allegations of plaintiff's ownership or right to possession of property; defendant's wrongful act toward or disposition of the property, interfering with plaintiff's possession; and damage to plaintiff. [Citation.] Money cannot be the subject of a cause of action for conversion unless there is a specific, identifiable sum involved.’” (PCO, Inc. v. Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP (2007) 150 Cal.App.4th 384, 395.) The core of the claim arises from Defendants’ receipt of the equipment, default on the payments, and the subsequent transfer of the equipment to third party Paramount Pictures in January 2021. [First Amend. Comp., ¶ 31-32.]

 

“Each provision of this division with regard to the rights, obligations and remedies of the seller, the buyer, purchasers or other third parties applies irrespective of title to the goods except where the provision refers to such title. Insofar as situations are not covered by the other provisions of this division and matters concerning title become material the following rules apply:

(2) Unless otherwise explicitly agreed title passes to the buyer at the time and place at which the seller completes his performance with reference to the physical delivery of the goods, despite any reservation of a security interest and even though a document of title is to be delivered at a different time or place; and in particular and despite any reservation of a security interest by the bill of lading.

Cal. U. Com. Code, § 2401

 

To the extent Plaintiff depends on the defective concealment cause of action, and Plaintiff’s lack of response to the Commercial Code statutory authority cited in the demurrer regarding the transfer of title upon delivery, the court finds the first amended complaint insufficiently articulates a factual basis for the subject cause of action. The demurrer is therefore sustained without leave to amend.

 

The court finds no basis for leave to amend. Plaintiff elected not to file an amended pleading following the prior demurrer on December 1, 2021. Instead, Plaintiff aggressively proceeded with the existing claims, and filed a motion for summary adjudication and three writs of attachment. The decision to serve Colt LED as a separate and independent party after the successful motion to quash in no way changes the prior actions of Plaintiff.

 

The court declines to make a finding of a dismissal with prejudice as to the “new” and separate defendant, however. (See Wells v. Marina City Properties, Inc. (1981) 29 Cal.3d 781, 789.) Nevertheless, the reliance on extrinsic evidence and lack of support for the existing operative complaint indicates an apparent concession that Plaintiff lacks facts to support any amended pleading against Colt LED, as a separate entity, and the other two defendants.

 

The court also finds the argument in opposition in fact constitutes an effective motion for reconsideration, as the requested relief also directly reflects back on the validity of the claims against the two appearing defendants. The time for any such (re)consideration long lapsed. The court therefore finds no basis for leave in that Plaintiff fails to establish a basis for correction thereby potentially presenting successful claim.

 

Motion to Compel Discovery reserved for April 25, 2023, but not filed. August 7, 2023, trial date, with motion and discovery cutoffs, to stand.

 

Colt LED to give notice to all parties.