Judge: Teresa A. Beaudet, Case: 22STCV33610, Date: 2023-02-06 Tentative Ruling

Case Number: 22STCV33610    Hearing Date: February 6, 2023    Dept: 50

Superior Court of California

County of Los Angeles

Department 50

Background

Plaintiff Fiona Valdes, individually and as Co-Trustee of the Ramon Iturrios Valdes Trust, dated February 7, 2005 (“Plaintiff”) filed this action on October 17, 2022 against Defendant Vanessa Valdes, individually and as Co-Trustee of the Ramon Iturrios Valdes Trust, dated February 7, 2005 (“Defendant”). The Complaint asserts causes of action for (1) breach of contract, (2) breach of implied covenant of good faith and fair dealing, (3) breach of implied duty to perform with reasonable care, and (4) intentional misrepresentation.

Defendant now demurs to each of the causes of action of the Complaint and moves to strike portions of the Complaint. Plaintiff opposes.

Discussion

A.    Legal Standard on Demurrer

A demurrer can be used only to challenge defects that appear on the face of the pleading under attack or from matters outside the pleading that are judicially noticeable. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) “To survive a demurrer, the complaint need only allege facts sufficient to state a cause of action; each evidentiary fact that might eventually form part of the plaintiff’s proof need not be alleged.” (C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872.) For the purpose of testing the sufficiency of the cause of action, the demurrer admits the truth of all material facts properly pleaded. (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967.) A demurrer “does not admit contentions, deductions or conclusions of fact or law.” (Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 713.)

B.    Allegations of the Complaint

In the Complaint, Plaintiff alleges that Plaintiff and Defendant are named as Co-Trustees of the Ramon Iturrios Valdes Trust, Dated February 7, 2005 (the “Trust”). (Compl., ¶ 12.)

Beginning in or around June 2021, a dispute between Plaintiff and Defendant arose as to the administration of the Trust. (Compl., ¶ 13.) Specifically, Plaintiff wished to sell the Trust’s real property located at 622-624 ½ North La Fayette Park Place, Los Angeles, California 90026 (hereinafter the “Property”) as part of the administration of the Trust, whereas Defendant

desired to retain the Property for her own benefit. (Compl., ¶ 13.)

Plaintiff and Defendant appeared for mediation on May 10, 2022 in order to resolve their differences concerning the administration of the Trust and the sale of the Property. (Compl.,       ¶ 14.) They reached an agreement during the mediation and executed a Settlement Agreement (hereinafter “Settlement Agreement”) on May 10, 2022. (Compl., ¶ 15.)

The Settlement Agreement provided that Defendant was to secure a loan against the Property in the amount of $130,000.00 and pay said funds to Plaintiff via a certified cashier’s check. (Compl., ¶ 16(a).) Plaintiff was to fully cooperate and sign all loan approval documents provided to her by Defendant and/or escrow. (Compl., ¶ 16(b).) In consideration of the $130,000.00 payment to Plaintiff, Plaintiff was to resign as a Co-Trustee of the Trust and waive any right to beneficial distribution from the Trust. (Compl., ¶16(c).) Moreover, under the Settlement Agreement, the Property was to be considered the sole property of Defendant. (Ibid.)

Plaintiff alleges that Defendant failed to secure a loan against the Property in the amount of $130,000.00 and breached the Settlement Agreement by failing to pay $130,000.00 to Plaintiff under the Settlement Agreement. (Compl., ¶¶ 17-18.)

C.    All Causes of Action

As an initial matter, Defendant asserts that the instant action is more appropriately governed by the Probate Court. Defendant notes that Plaintiff alleges, inter alia, that “[b]eginning in or around June 2021, a dispute between the Parties arose as to the administration of the Trust.” (Compl., ¶ 13.) Plaintiff counters that the Complaint is narrowly tailored to the breach of the parties’ Settlement Agreement, and notes that Plaintiff does not seek relief concerning administration and/or distribution of the Trust via the instant Complaint. Moreover, Defendant does not cite to any legal authority demonstrating that the instant action must be brought in the Probate Division.

D.    Breach of Contract

“¿A cause of action for¿damages for breach of contract is comprised of the following elements: (1) the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to plaintiff.¿” (Careau & Co. ¿v. Security Pacific Business Credit, Inc.¿(1990) 222 Cal.App.3d 1371, 1388¿.) Plaintiff’s first cause of action for breach of contract alleges that Defendant breached the Settlement Agreement by failing to perform her central duties thereunder, including paying Plaintiff $130,000.00 pursuant to the terms of the Settlement Agreement. (Compl., ¶ 26.)

Defendant asserts that the breach of contract cause of action fails to state facts sufficient to constitute a cause of action. In support of this assertion, Defendant notes that Plaintiff alleges that “[o]n May 10, 2022, Plaintiff and Defendant entered into an Agreement for Defendant to pay Plaintiff $130,000.00 via certified cashier’s check from a loan which was to be secured against the Property in consideration for Plaintiff’s resignation as Co-Trustee of the Trust and for her waiver of beneficial interest and distribution under the Trust.” (Compl., ¶ 23.) Defendant asserts that this was not the consideration as stated in the Settlement Agreement.

 Defendant notes that the Settlement Agreement attached as Exhibit A to the Complaint provides, inter alia, “[i]n consideration of $130,000 (Total proceeds originating from and upon approval of a pending loan against the Trust property located at 624 N. LAFAYETTE PARK PLACE, LOS ANGELES, CA 90026 by Vanessa Valdes), Fiona Valdes agrees to fully cooperate and sign all loan documents and any other documents that would facilitate and expedite the approval of said loan through Escrow.” (Compl., ¶ 15, Ex. A.) But Plaintiff also alleges in the Complaint that the Settlement Agreement terms include that “Plaintiff is to fully cooperate and sign all loan approval documents provided to her by Defendant and/or escrow.” (Compl., ¶ 16(b).) In addition, the Settlement Agreement attached as Exhibit “A” to the Complaint also provides that “[u]pon approval of said loan through Escrow & upon issuance of a certified cashier’s check to Fiona Valdes, Fiona Valdes agrees to resign herself as Successor Trustee and Beneficiary of the Ramon Iturrios Valdes Trust Dated February 4, 2005…” (Compl., ¶ 15, Ex. A.)

Defendant also asserts that the damages alleged in the first cause of action are non-recoverable. Plaintiff alleges that “[a]s a proximate result of Defendant’s breach of the Agreement, Plaintiff has suffered substantial economic and non-economic injuries, in an amount to be proven at trial.” (Compl., ¶ 27.) Defendant argues that “[t]he alleged damages of ‘substantial economic and non-economic injuries’ are not supported by law or facts…” (Demurrer at p. 6:24-25.) To the extent Defendant is arguing that the alleged damages are not supported by the evidence, this is a factual argument that is not appropriate for determination by demurrer. As to the argument that Plaintiff’s request for damages is not supported by the law, Defendant notes that “damages for mental suffering and emotional distress are generally not recoverable in an action for breach of an ordinary commercial contract in California.” (Erlich v. Menezes (1999) 21 Cal.4th 543, 558.) To the extent Defendant is arguing that Plaintiff cannot recover non-economic damages in connection with the first cause of action, the Court notes that “¿a demurrer cannot rightfully be sustained to part of a cause of action or to a particular type of damage or remedy.¿” (¿Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1047¿; ¿see also PH II, Inc. v. Superior Court (1995) 33 Cal.App.4th 1680, 1682 [“A demurrer does not lie to a portion of a cause of action.”]¿.) “¿[W]hen a substantive defect is clear¿from the face of a complaint . . . a defendant may attack that portion of the cause of action by filing a motion to strike.¿” (PH II, Inc. v. Superior Ct., supra, ¿33 Cal.App.4th at pp. 1682-1683¿.)   

Defendant further contends that other than Plaintiff’s allegation that “[a]t all relevant times, Plaintiff performed all conditions, covenants, and promises required of her by the Agreement,” (Compl., ¶ 25), there are no factual allegations as to what Plaintiff did to perform what was required of her under Settlement Agreement. In the opposition, Plaintiff points out that the complaint alleges that “Plaintiff did all, or substantially all, of the significant things the contract required of her (see Complaint ¶ 25)” and the “Complaint succinctly provides that . . . Plaintiff was to cooperate and execute certain loan documents.”  (Opp’n. 4:18-19, 5, 8-10; Compl. ¶16(b).) The Court finds that these allegations as to performance are sufficient for the pleading stage.

            Based on the foregoing, the Court overrules Defendant’s demurrer to the first cause of action.

E.     Breach of Implied Covenant of Good Faith

Defendant argues that the second cause of action for breach of implied covenant of good faith and fair dealing must fail because this cause of action and the breach of contract cause of action both rely on the same alleged facts and seek the same damages. Defendant cites to Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1395, where the Court of Appeal noted that “[i]f the allegations do not go beyond the statement of a mere contract breach and, relying on the same alleged acts, simply seek the same damages or other relief already claimed in a companion contract cause of action, they may be disregarded as superfluous as no additional claim is actually stated. Thus, absent those limited cases where a breach of a consensual contract term is not claimed or alleged, the only justification for asserting a separate cause of action for breach of the implied covenant is to obtain a tort recovery.” 

Defendant notes that in support of the second cause of action for breach of implied covenant of good faith and fair dealing, Plaintiff alleges that “Defendant breached the covenant of good faith and fair dealing owed to Plaintiff by, among other things, the wrongful conduct alleged herein, and deprived Plaintiff of the benefits of the Parties’ Agreement, as alleged in herein. In doing so, Defendant did not act fairly and in good faith.” (Compl., ¶ 32.)

Plaintiff asserts that the second cause of action is separate from the breach of contract cause of action. As Plaintiff notes, she seeks punitive damages in connection with the second cause of action (Compl., ¶ 34), which are not sought in connection with the first cause of action for breach of contract.

Defendant also asserts that Plaintiff’s requested damages under the second cause of action are “conclusory, ambiguous, speculative, and wholly unsupported by any factual allegations of damages…” (Demurrer at p. 7:25-26.) But as discussed, Plaintiff alleges that Defendant breached the Settlement Agreement by failing to pay $130,000.00 to Plaintiff under the agreement. (Compl., ¶ 18.)

Based on the foregoing, the Court overrules the demurrer to the second cause of action.

F.     Breach of Implied Duty to Perform with Reasonable Care

Defendant asserts that the third cause of action for breach of implied duty to perform with reasonable care must fail because it does not contain sufficient factual allegations.  

However, in support of the third cause of action, Plaintiff alleges that “Defendant has breached the covenant to perform with reasonable care by failing to take necessary measures to pay Plaintiff $130,000.00 in a timely manner.” (Compl., ¶ 39.) Plaintiff notes in the Complaint that “[a]ccompanying every contract is a common-law duty to perform with care, skill, reasonable expedience, and faithfulness the thing agreed to be done, and a negligent failure to observe any of these conditions is a tort, as well as a breach of the contract.” (Holguin v. Dish Network LLC (2014) 229 Cal.App.4th 1310, 1324 [internal quotations omitted].)

            Defendant also asserts that the third cause of action is ambiguous because “Defendant’s obligation to pay Plaintiff $130,000.00 was dependent on Defendant securing an approved loan and there are no facts alleged to demonstrate how Defendant failed to take necessary measures or to act reasonably to obtain an approval for a loan.” (Demurrer at p. 8:9-12.) But as discussed, Plaintiff alleges that “Defendant failed to secure a loan against the Property in the amount of

$130,000.00.” (Compl., ¶ 17.) The Court does not find that the third cause of action is ambiguous. 

            The Court does not find that Defendant has demonstrated that the third cause of action is insufficiently pled and thus overrules the demurrer to the third cause of action.

G.    Intentional Misrepresentation

“¿To plead a cause of action for fraud, a plaintiff must plead facts showing the following elements: (1) misrepresentation, (2) knowledge of falsity, (3) intent to defraud, (4) justifiable reliance, and (5) resulting damage.¿” (¿Charnay v. Cobert (2006) 145 Cal.App.4th 170, 184¿.) 

In support of the fourth cause of action for intentional misrepresentation, Plaintiff alleges that “[o]n or about May 10, 2022, Defendant made the representation to Plaintiff that she was able to secure a loan of $130,000.00 in order to compensate Plaintiff under the Agreement.” (Compl., ¶ 43.) Plaintiff alleges that “[t]he representations made by Defendant were in fact false. Defendant had no intention of securing a loan against the Property, and on the information and belief of Plaintiff, Defendant was aware that she could not qualify for such a loan. Nevertheless, Defendant entered into the Agreement with Plaintiff so that administration of the Trust could be stalled and so that Plaintiff would not take legal action to compel the sale of the Property.” (Compl., ¶ 44.)

In the demurrer, Defendant notes that “[t]he law is well established that actionable misrepresentations must pertain to past or existing material facts. Statements or predictions regarding future events are deemed to be mere opinions which are not actionable.” (Cansino v. Bank of America (2014) 224 Cal.App.4th 1462, 1469 [internal citation omitted].) The Cansino Court found that “defendants’ alleged representations—that plaintiffs’ property would continue to appreciate in the future and that plaintiffs could then sell or refinance their home based on this forecasted future appreciation—are not actionable in fraud.” (Id. at p. 1471.) The Court further noted that “[l]ike acts of nature and their consequences, the future state of a financial market is unknown. Any future market forecast must be regarded not as fact but as prediction or speculation.” (Id. at p. 1470.)

Defendant argues that here, the allegation that “Defendant made the representation to Plaintiff that she was able to secure a loan” (Compl., ¶ 43) was a prediction of Defendant’s ability to obtain a loan, a statement regarding a future event, and thus is not actionable fraud.

Plaintiff counters that Defendant’s misrepresentation was not concerning a future event, but one which was presently occurring. The Court agrees. Unlike the alleged representations in Cansino that plaintiffs’ property would continue to appreciate in the future, the alleged misrepresentation by Defendant here is that she “was able to secure a loan of $130,000.00 in order to compensate Plaintiff under the Agreement.” (Compl., ¶ 43.) Defendant here did not make any alleged misrepresentations concerning the future state of a financial market.

Defendant also asserts that “this alleged representation contradicts the words throughout the agreement that the $130,000 would be paid upon approval of a loan.” (Demurrer at p. 9:13-14.) But regardless of what the Settlement Agreement allegedly provides, Plaintiff still alleges that Defendant “made the representation to Plaintiff that she was able to secure a loan of $130,000.00 in order to compensate Plaintiff under the Agreement,” and that “[t]he representations made by Defendant were in fact false.” (Compl., ¶¶ 43-44.)

            Based on the foregoing, the Court overrules the demurrer to the fourth cause of action.

H.    Motion to Strike

A court may strike any “irrelevant, false, or improper matter inserted in any pleading” or all or any part of a pleading “not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court.” (Code Civ. Proc., § 436.) “The grounds for a motion to strike shall appear on the face of the challenged pleading or from any matter of which the court is required to take judicial notice.” (Code Civ. Proc., § 437.)

 Defendant moves to strike Plaintiff’s request for punitive damages from the Complaint. Plaintiff seeks punitive damages in connection with the second, third, and fourth causes of action. (Compl., ¶¶ 34, 41, 50.) As set forth above, the Court finds that Plaintiff has sufficiently alleged a cause of action for intentional misrepresentation, which supports a punitive damages claim as to this cause of action. 

As to the second and third causes of action, Defendant notes that “[i]n an action for the breach of an obligation not arising from contract, where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice, the plaintiff, in addition to the actual damages, may recover damages for the sake of example and by way of punishing the defendant.” (Civ. Code, § 3294, subd. (a), emphasis added.) Defendant asserts that the second and third causes of action arise from a contract, and that punitive damages are accordingly not recoverable as to such causes of action.

 In the opposition, Plaintiff appears to assert that the second and third causes of action constitute a tort. As to the second cause of action, Plaintiff cites to Gruenberg v. Aetna Ins. Co. (1973) 9 Cal.3d 566, 575, where the California Supreme Court noted that “[a]n insurer owes to its insured an implied-in-law duty of good faith and fair dealing that it will do nothing to deprive the insured of the benefits of the policy. Included within this duty in the case of a liability insurance policy is the duty to act reasonably and in good faith to settle claims against the insured by a third person. The violation of that duty sounds in tort notwithstanding that it may also constitute a breach of contract.” (Internal citations omitted.) In addition, as set forth above in connection with the third cause of action, “[a]ccompanying every contract is a common-law duty to perform with care, skill, reasonable expedience, and faithfulness the thing agreed to be done, and a negligent failure to observe any of these conditions is a tort, as well as a breach of the contract.” (Holguin v. Dish Network LLC, supra, 229 Cal.App.4th at p. 1324 [internal quotations omitted].)

Defendant also asserts that the allegations of the Complaint do not rise to the level of despicable conduct which subjects Plaintiff to cruel and unjust hardship in conscious disregard of Plaintiff’s rights. A motion to strike may lie where the facts alleged do not rise to¿the level of “malice,¿oppression¿or fraud” required to support a punitive damages award. ((See Turman v. Turning Point of Central California, Inc. (2010) 191 Cal.App.4th 53, 63-64.)¿“‘Malice’

means . . . despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.” ((Civ. Code, § 3294(c)(1).) “‘Oppression’ means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights.” (Civ. Code,¿§ 3294(c)(2).) “‘Fraud’ means an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.” (Civ. Code,¿§ 3294(c)(3).)¿“¿Despicable conduct is conduct that is so vile, base, contemptible, miserable, wretched or loathsome that it would be looked down upon and despised by ordinary decent people. [Citation.] Such conduct has been described as having the character of outrage frequently associated with crime.”¿ (¿Johnson & Johnson Talcum Powder Cases (2019) 37 Cal.App.5th 292, 332-333 [internal quotations omitted]¿.)

Plaintiff’s Complaint alleges that punitive damages are warranted because “Defendant did not make an attempt to adequately perform her duties under the Agreement, and instead, entered into the Agreement with the intent of breaching the same in order to forestall proper administration of the Trust and prevent Plaintiff from taking legal action to compel the sale of the Property.” (Compl., ¶ 19.) Plaintiff further alleges that “Defendant’s conduct in entering into the Agreement with Plaintiff and making the promises set forth thereunder, all while not actually intending to perform under the Agreement, was carried out with a knowing and willful disregard of Plaintiff’s common law rights.” (Compl., ¶ 20.) The Court finds that Plaintiff has sufficiently alleged “fraud” for purposes of her requests for punitive damages. 

Based on the foregoing, the Court denies Defendant’s motion to strike.  

Conclusion

Based on the foregoing, Defendant’s demurrer is overruled and Defendant’s motion to strike is denied.  

Defendant is ordered to file and serve her answer within 10 days of the date of this Order.¿ 

Defendant is ordered to give notice of this Order.  

DATED:  February 6, 2023   

                        ________________________________

Hon. Teresa A. Beaudet

Judge, Los Angeles Superior Court