Judge: Stephen P. Pfahler, Case: 23CHCV00101, Date: 2023-06-29 Tentative Ruling

Case Number: 23CHCV00101    Hearing Date: June 29, 2023    Dept: F49

DEMURRER TO THE COMPLAINT

MOVING PARTY: Defendant, American Honda Motor Co., Inc.

RESPONDING PARTY: Plaintiffs, Manuel Quintero, et al.

RELIEF REQUESTED

Demurrer to the Complaint

·         2^nd Cause of Action: Fraudulent Inducement – Concealment

Motion to Strike Prayer for Punitive Damages

SUMMARY OF ACTION

Plaintiffs  Manuel Quintero and Miriam Hernandez allege their 2018 new Honda Odyssey vehicle suffers from a defective transmission. On January 13, 2023, Plaintiff filed a complaint for Violation of Song Beverly Act – Breach of Express Warranty, and Fraudulent Inducement – Concealment.

RULING

Demurrer: Sustained with Leave.

American Honda Motor Co., Inc. (Honda) brings the subject demurer to the second cause of action in the complaint for Fraudulent Inducement - Concealment on grounds the claims lack facts in support of the claims for concealment, and the claim is barred by the economic loss rule. Plaintiff counters that the complaint sufficiently articulates the challenged fraud claim. Plaintiff denies any bar of the claim under the economic loss rule. Honda in reply reiterates the insufficient facts and economic loss rule arguments.

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.]

On the first part of the demurer Honda presents extensive challenge to the claim on grounds of a lack of sufficient factual particularity against the corporate entity, including the denial of any transactional relationship between the parties. Since Plaintiffs did not directly purchase the vehicle from Honda, no basis for a claim of direct concealment or omission(s) exists in the subject context. Honda additionally denies the existence of a relationship between the parties thereby establishing a basis for disclosure.

The operative complaint relies on allegations that Honda (as the only named party in the subject cause of action) failed to disclose the defective transmission within the vehicle at the time of purchase. Plaintiff contends Honda was under a duty to disclose said known defect, which was identified by Honda prior to the time of the sales transaction.

“[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]; Marketing West, Inc. v. Sanyo Fisher (USA) Corp. (1992) 6 Cal.App.4th 603, 612–613.)

“‘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.) “A plaintiff's burden in asserting a fraud claim against a corporate employer is even greater. In such a case, the plaintiff must ‘allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written.’” (Lazar v. Superior Court, (1996) 12 Cal.4th 631, 645.)

“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.) “Each of the other three circumstances in which nondisclosure may be actionable presupposes the existence of some other relationship between the plaintiff and defendant in which a duty to disclose can arise. … As a matter of common sense, such a relationship can only come into being as a result of some sort of transaction between the parties.” (Id. at pp. 336–337.) In addition to the authority cited above, California law also provides for disclosure obligations by resellers. “Under California law, a vendor has a duty to disclose material facts not only to immediate purchasers, but also to subsequent purchasers when the vendor has reason to expect that the item will be resold.” (OCM Principal Opportunities Fund, L.P. v. CIBC World Markets Corp. (2007) 157 Cal.App.4th 835, 859.)

The court finds the complaint properly alleges the purchase of the Honda vehicle from a Honda authorized dealership, with the represented warranty and required merchantability. [Comp., ¶¶ 8-9, 55.] The complaint extensively details knowledge of the defect and continued use of the defective transmission without disclosure to plaintiffs at the time of the transaction. [Comp., ¶¶ 11-58.]

Honda relies on the denial of any agent relationship between the manufacturer and dealership, thereby blocking a basis of reliance for making a representation on behalf of Honda. The court accepts the basic foundation of this argument, and also notes that the complaint omits any reference to any agency relationship between Honda and the automobile dealership where the vehicle was both purchased and repairs undertaken. A recent case addressed similar claims.

“Plaintiffs alleged that they bought the car from a Nissan dealership, that Nissan backed the car with an express warranty, and that Nissan's authorized dealerships are its agents for purposes of the sale of Nissan vehicles to consumers. In light of these allegations, we decline to hold plaintiffs’ claim is barred on the ground there was no relationship requiring Nissan to disclose known defects. In light of these allegations, we decline to hold plaintiffs’ claim is barred on the ground there was no relationship requiring Nissan to disclose known defects.” (Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 828, 844.)

The case was granted review. “Grant of review by the Supreme Court of a decision by the Court of Appeal does not affect the appellate court's certification of the opinion for full or partial publication under rule 8.1105(b) or rule 8.1110, but any such Court of Appeal opinion, whether officially published in hard copy or electronically, must be accompanied by a prominent notation advising that review by the Supreme Court has been granted. [¶] (2) The Supreme Court may order that an opinion certified for publication is not to be published or that an opinion not certified is to be published. The Supreme Court may also order depublication of part of an opinion at any time after granting review.” (Cal. Rules of Court, rule 8.1105(e)(1)(B), (e)(2).) The California Supreme Court specifically denied the request for depublication was denied, and the court therefore may consider the First Appellate District opinion. (Dhital v. Nissan North America (Cal. 2023) 304 Cal.Rptr.3d 82, 83.)

The withheld information constituted a material fact that impacts a purchase decision. The court also finds that even without an explicit allegation of an agency relationship, the circumstances of the dealership delegated responsibility for provision of warranty services establishes a relationship for purposes of ruling on the demurrer. In other words, the court declines to make any finding as a matter of law regarding the scope of any agency relationship, especially given the review of Dhital v. Nissan North America, as well as other cases potentially addressing the scope of agency in regards to enforcement of arbitration clauses on manufacture warranty claims through dealership purchased vehicles pending (Ford Motor Warranty Cases (2023) 89 Cal.App.5th 1324). Given the allegations of a failure to disclose the known defect, the complaint sufficiently articulates said claim under existing authority. The court declines to further consider Honda’s argument regarding insufficient facts at the corporate level in that Plaintiffs are not relying on a claim for misrepresentation. Regardless, any variation on the wording of the basis of the claim offered by Honda can be addressed in discovery.

As for the economic loss rule, the current state of the economic loss rule allows for a claim for concealment upon a pleading articulating separate and independent from the warranty claim. Warranty claims arise in contract. (Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 993; Dhital v. Nissan North America, Inc., supra, 84 Cal.App.5th 843; see Anderson v. Ford Motor Co. (2022) 74 Cal.App.5th 946, 963.) Again, the complaint arises in concealment not misrepresentation. (In re Ford Motor Co. DPS6 Powershift Transmission Products Liability Litigation (C.D. Cal. 2020) 483 F.Supp.3d 838, 848-850.)

While the court finds no legal bar to the claim under the ecomomic loss rule, the court finds no allegations separate and independent from the failure to disclose claims. The demurrer is therefore sustained with leave to amend as to this cause of action.

Motion to Strike

Honda moves to strike the prayer for punitive damages. The complaint itself fails to distinguish as to which causes of action Plaintiffs seek to support the claim for punitive damages. Plaintiff in opposition contends the fraud claim supports punitive damages. Honda in reply states that the economic loss rule bars the fraud claim, and therefore the basis of the punitive damages claim.

On the fraud cause of the action, the motion to strike is MOOT. On the Song-Beverly Act violations, Plaintiffs cannot recover both statutory penalties and punitive damages. (Bowser v. Ford Motor Co. (2022) 78 Cal.App.5th 587, 627.) The motion to strike is therefore granted, as applicable, to any claim for punitive damages in the first cause of action.

In summary, the demurrer is sustained with 30 days leave to amend as to the second cause of action. Plaintiff is only granted leave to amend the facts within the second cause of action in order to allege a separate and distinct claim for damages, and may not otherwise add any new causes of action. The motion to strike is granted, as applicable, to any claim for punitive damages in the first cause of action, and moot as to the second cause of action.

Motion to compel arbitration set for August 18, 2023.

Defendant to give notice.