Judge: Stephen P. Pfahler, Case: 22CHCV00048, Date: 2022-08-03 Tentative Ruling

Case Number: 22CHCV00048    Hearing Date: August 3, 2022    Dept: F49

Dept. F-49

Date: 8-3-22

Case #22CHCV00048

Trial Date: Not Set

 

DEMURRER

 

MOVING PARTY: Defendant, Andrew Alex

RESPONDING PARTY: Plaintiff, Marcos Ferrufino

 

RELIEF REQUESTED

Demurrer to the First Complaint

·         1st Cause of Action: Fraud

·         2nd Cause of Action: Breach of Contract

 

Motion to Strike

·         Damages Allegations and Claim for Punitive Damages

 

SUMMARY OF ACTION

Plaintiff Marcos Ferrufino alleges Defendant Andrew Alex sold a business entity on October 1, 2021, and failed to pay Plaintiff his 50% share of the sale. Plaintiff states the value of the business at $1.5 million, though the amount of the sale remains unknown.

 

On January 19, 2022, Plaintiff filed a complaint for Fraud and Breach of Contract.  On March 24, 2022, the court sustained the demurrer to the complaint with 30 days leave to amend. On April 26, 2022, Plaintiff filed a first amended complaint for Fraud and Breach of Contract.

 

RULING

Request for Judicial Notice: Granted.

The court takes notice of the filed pleadings and court docket, but cannot take notice of the content of any item for the truth of the matter submitted.

 

Demurrer: Sustained with Leave to Amend.

1st Cause of Action: Fraud

Defendant contends the first amended complaint fails to allege fraud, concealment or negligent misrepresentation, with sufficient factual particularity. Defendant contends the negligent and intentional misrepresentation claims constitute new causes of action presented without leave of court. Plaintiff in opposition cites to the elements of fraud and concludes the operative complaint sufficiently articulates said claims. Defendant in reply first notes the late filing of the first amended complaint (for which Defendant did not bring a motion to strike upon the lapsed date), and reiterates the deficiencies with the fraud based claims. Defendant also introduces a new argument regarding economic loss doctrine, due to the contractual recovery sought in the second cause of action.

 

“‘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.) “‘Active concealment or suppression of facts by a nonfiduciary “is the equivalent of a false representation, i.e., actual fraud.” [Citation.] (Citation).)’ A fraud claim based upon the suppression or concealment of a material fact must involve a defendant who had a legal duty to disclose the fact. (Civ.Code, § 1710, subd. (3) [a deceit includes “[t]he suppression of a fact, by one who is bound to disclose it, or who gives information of other facts which are likely to mislead for want of communication of that fact”]; Citation.)” (Hoffman v. 162 North Wolfe LLC (2014) 228 Cal.App.4th 1178, 1186.)

 

Defendant correctly argues that Plaintiff now presents new and different fraud claims within the action. Plaintiff now alleges a fraudulent scheme to “underpay” Plaintiff through Defendant own failure to pay equal amounts for products, services and rent; the original withholding of money from the sale of the business and property without equally sharing profits; and, a second new claim alleging the transfer of stolen property to a “unsuspecting buyer,” which led to “proof of damages in excess of $500,000.”

 

Even accepting the new claims, the terse allegations continue to lack sufficient factual particularity. Plaintiff alleges both misrepresentation and concealment without distinction. The last claim regarding fraud based claim, as the alleged stolen goods were sold to a third party presents problems as to the actual misrepresentation and/or basis of reliance.

 

The demurrer is therefore sustained with leave.

 

2nd Cause of Action: Breach of Contract

Defendants submit the subject demurrer on grounds that the complaint fails to allege the terms of any alleged contract and breach. Plaintiff in opposition refers to the parties “oral” contract and a presentation of the terms. Plaintiff additionally offers a statute of frauds defense, though the argument was not raised this time. Defendant in reply notes the written contract basis of the operative complaint, and therefore the lack of application of the statute of frauds defense. Defendant also references tax forms and invoices not actually part of the operative pleading, and not included with the filed opposition, but only references, as not supporting the claim. Finally, defendant reiterates the lack of sufficient terms.

 

“To state a cause of action for breach of contract, [a plaintiff] must plead the contract, his performance of the contract or excuse for nonperformance, [defendant’s] breach and the resulting damage. (Citation.) Further, the complaint must indicate on its face whether the contract is written, oral, or implied by conduct. (Citation.)” (Otworth v. Southern Pac. Transportation Co. (1985) 166 Cal.App.3d 452, 458–59.) In examining a breach of contract claim, the court is required to examine the terms, or at least the legal effect of the contract. (Blank v. Kirwan, supra, 39 Cal.3d at p. 318 [“we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context”]; Otworth v. Southern Pac. Transportation Co., supra, 166 Cal.App.3d at p. 459 [“If the action is based on an 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 instrument must be attached and incorporated by reference”]; Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 198–199 [“In an action based on a written contract, a plaintiff may plead the legal effect of the contract rather than its precise language”].)

 

Plaintiff checked the “written contact” box this time, notwithstanding Plaintiff in opposition identifying the contract as oral and offering a statute of frauds defense. The operative complaint lacks an actual copy of the agreement and only minimally articulates the alleged existence of the agreement made on October 10, 2008 to split the proceeds of any sale of the unspecified business entity. The court therefore finds the uncertain basis of the agreement and minimally pled terms a sufficient basis to sustain the demurrer.

 

Further, the court finds both the contract and fraudulent based forms of recovery potentially problematic. “‘It has been well established in this state that if the cause of action arises from a breach of a promise set forth in the contract, the action is ex contractu but if it arises from a breach of duty growing out of the contract it is ex delicto. [Citations.]’” (Wentland v. Wass (2005) 126 Cal.App.4th 1484, 1495; (Erlich v. Menezes (1999) 21 Cal.4th 543, 551 [“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”; Stop Loss Ins. Brokers, Inc. v. Brown & Toland Medical Group (2006) 143 Cal.App.4th 1036, 1057–1058.) Given the lack of a valid contract cause of action, the court considers the subject claim under a required finding of an independent duty of care. Plaintiff alleges no independent basis(es) of fraud from the alleged obligations of the contract. The court sustains the demurrer on this basis as well.

 

The demurrer is sustained with 20 days leave to amend. Plaintiff may not add new or different causes of action beyond the scope of the existing claims, but the court will allow Plaintiff the opportunity to allege any and all fraud based claims as long as they arise from the alleged original business relationship of the parties. (Harris v. Wachovia Mortgage, FSB (2010) 185 Cal.App.4th 1018, 1023.) The court acknowledges the arguments regarding the propriety of the claims, but elects to allow Plaintiff an opportunity under the public policy standards allowing a party the right to seek redress of grievances.

 

Nevertheless, because the court has now twice sustained the demurrer with leave to amend, the subject ruling now counts towards the amendment limit guidelines. “In response to a demurrer and prior to the case being at issue, a complaint or cross-complaint shall not be amended more than three times, absent an offer to the trial court as to such additional facts to be pleaded that there is a reasonable possibility the defect can be cured to state a cause of action. The three-amendment limit shall not include an amendment made without leave of the court pursuant to Section 472, provided the amendment is made before a demurrer to the original complaint or cross-complaint is filed.” (Code Civ. Proc., § 430.41, subd. (e)(1).)

 

Motion to Strike: Moot.

 

Defendant may bring an ex parte motion to dismiss the action if Plaintiff fails to timely file a second amended complaint.

 

Defendant to give notice.