Judge: Stephen P. Pfahler, Case: 22CHCV00178, Date: 2023-02-15 Tentative Ruling

Case Number: 22CHCV00178    Hearing Date: February 15, 2023    Dept: F49

Dept. F-49

Date: 2-15-23

Case #22CHCV00178

Trial Date: Not Set

 

DEMURRER

 

MOVING PARTY: Defendant, Tammy Booker

RESPONDING PARTY: Plaintiff, Don Khalighi, et al.

 

RELIEF REQUESTED

Motion to Strike the First Amended Complaint

·         1st Cause of Action: Breach of Contract

·         2nd Cause of Action: Breach of Fiduciary Duty

·         3rd Cause of Action: Embezzlement

·         4th Cause of Action: Fraud

 

SUMMARY OF ACTION

Plaintiffs Don and Armenouhi Khalighi are homeowners within a real estate development governed by Quail Ranch Estates HOA, Inc. (HOA). Pursuant to “Articles and Bylaws,” the HOA collected $150/month in assessments for the benefit of participating homeowners. Plaintiffs alleges the individual defendant officers comprising the HOA board violated “respective fiduciary duties,” due to their failure to pay annual fees to the State of California, thereby leading to the suspension of the HOA as a corporate entity; failed to hold required meetings; failed to inform homeowner members regarding “various contracts” for common area maintenance and landscaping; failed to provide adequate financial records upon demand of Plaintiffs; and, authorized improper expenditures and withdrawals without apparent board and/or homeowner approval.

 

On March 17, 2022, Plaintiffs filed their complaint for Breach of Contract, Negligence, Embezzlement, Fraud, Accounting and Declaratory Relief. On July 11, 2022, Defendant Michael Morrell answered the complaint.

 

On August 2, 2022, the court sustained the demurrer of Quail Ranch Estates HOA, Inc. with 30 days leave to amend. On August 24, 2022, the court sustained the demurrer of Tammy Booker to the fraud and embezzlement causes of action. On August 24, 2022, Plaintiff also filed a first amended complaint for Breach of Contract, Breach of Fiduciary Duty, Embezzlement, Fraud, Accounting and Declaratory Relief.

 

On September 26, 2022, Quail Ranch Estates HOA, Inc. answered the complaint and filed a cross-complaint against Don and Armenouhi Khalighi for Account Stated, Money Paid, Open Book Account, Quantum Meruit, and Violation of the CC&Rs.

 

On October 19, 2022, court granted the motion to strike the second cause of action for breach of fiduciary duty.

 

RULING: Sustained with Leave to Amend.

Tammy Booker brings the subject demurrer to the breach of contract, breach of fiduciary duty, embezzlement, and fraud causes of action. Given the October 19, 2022, ruling on the motion to strike of Quail Ranch Estates HOA, Inc., the demurrer to breach of fiduciary duty cause of action is moot.

 

Defendant challenges the breach of contract embezzlement, and fraud claims on grounds that Booker was not a party to any contract, nothing in the complaint alleges a criminal act in support of the embezzlement claim, and the fraud claim is pled with insufficient factual particularity. The court electronic filing system shows no opposition or reply at the time of the tentative ruling publication cutoff.

 

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.]

 

1st Cause of Action, Breach of Contract: Sustained with Leave to Amend.

Defendant denies any contractual relationship between the parties.

 

“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”].)

 

The first amended complaint alleges the existence of a contract between Plaintiffs and the homeowner association. [First Amend. Comp., ¶ 17.] Nothing else in the complaint alleges any basis of a contractual relationship with the individual defendants via the homeowner association agreement. (See Berryman v. Merit Property Management, Inc. (2007) 152 Cal.App.4th 1544, 1553.) The demurrer is sustained.

 

3rd Cause of Action: Embezzlement

Tammy Booker challenges the right to allege a civil claim for embezzlement, or as an alternative claim for conversion.

 

The criminal act of embezzlement is the conversion of property within the intent to defraud for personal benefit. (People v. Sisuphan (2010) 181 Cal.App.4th 800, 814 (footnote 12).) “‘A [civil] 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 operative complaint against fails to allege ownership of the property or basis of standing to act on behalf of the HOA. The demurrer is sustained.

 

4th Cause of Action: Fraud

The demurrer challenges the factual sufficiency of the fraud claims.

 

“‘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.)

 

Plaintiff insufficiently articulates the elements of fraud. Plaintiff relies at least in part on the alleged representations by defendant Michael Morrell to Tammy Booker. Like the embezzlement claim, it’s also not clear how Plaintiff seeks to allege a basis of standing for alleged misrepresentations to the HOA. The demurrer is sustained.

 

In summary, the unopposed demurrer is moot as to the breach of fiduciary duty cause of action, and sustained with 15 days leave to amend as to the breach of contract, embezzlement, and fraud causes of action. Plaintiff may NOT add new or different causes of action, and may only add facts within the scope of the existing claims. (Harris v. Wachovia Mortgage, FSB (2010) 185 Cal.App.4th 1018, 1023.) Any new causes of action added without leave from court are subject to a motion to strike.

 

“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).) The court has now considered two iterations of the complaint. The court will consider the applicable standard should a second amended complaint and a demurrer get filed.

 

Demurrer of Patrick Brooker set for February 21, 2023.

 

Tammy Booker to give notice.