Judge: Theresa M. Traber, Case: 21STCV41132, Date: 2023-04-03 Tentative Ruling


Case Number: 21STCV41132    Hearing Date: April 3, 2023    Dept: 47

Tentative Ruling

 

Judge Theresa M. Traber, Department 47

 

 

HEARING DATE:     April 3, 2023                          TRIAL DATE: NONE SET

                                                          

CASE:                         Dermot Damian Givens v. Formosa Gardens HOA et al..

 

CASE NO.:                 21STCV41132

 

DEMURRER TO FIRST AMENDED CROSS-COMPLAINT

 

MOVING PARTY:               Plaintiff/Cross-Defendant Dermot Damian Givens.

 

RESPONDING PARTY(S): Defendant/Cross-Complainant Formosa Gardens HOA,

 

CASE HISTORY:

 

STATEMENT OF MATERIAL FACTS AND/OR PROCEEDINGS:

           

            This is an action for fraud and enforcement of governing documents for a homeowner’s association under the Davis-Stirling Act. Plaintiff sued Formosa Gardens HOA (“Defendant HOA”) and Alexsei Durack and Kevin Ngoc Khuat (“Individual Defendants”) alleging breach of governing documents, multiple violations of the Davis-Stirling Act (Civ. Code § 5200 et seq.), fraud, theft in violation of Penal Code section 496, conversion, intentional interference with contractual relations, and declaratory relief.

 

            Cross-Defendant demurs to the fourth, fifth, and sixth causes of action in the First Amended Cross-Complaint.

           

TENTATIVE RULING:

 

            Cross-Defendant’s Demurrer to the First Amended Cross-Complaint is OVERRULED.

 

DISCUSSION:

 

            Cross-Defendant demurs to the fourth, fifth, and sixth causes of action in the First Amended Cross-Complaint.

Legal Standard

 

A demurrer tests whether a complaint (or cross-complaint) states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.) When considering demurrers, courts read the allegations liberally and in context. (Taylor v. City of Los Angeles Dept. of Water and Power (2006) 144 Cal.App.4th 1216, 1228.) In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed.” (SKF Farms v. Superior Court (1984) 153 Cal.App.3d 902, 905.) “The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action.” (Hahn, supra, 147 Cal.App.4th at p. 747.) The ultimate facts alleged in the [cross-] complaint must be deemed true, as well as all facts that may be implied or inferred from those expressly alleged. (Marshall v. Gibson, Dunn & Crutcher (1995) 37 Cal.App.4th 1397, 1403; see also Shields v. County of San Diego (1984) 155 Cal.App.3d 103, 133 [stating, “[o]n demurrer, pleadings are read liberally and allegations contained therein are assumed to be true”].) “This rule of liberal construction means that the reviewing court draws inferences favorable to the plaintiff, not the defendant.” (Perez v. Golden Empire Transit Dist. (2012) 209 Cal.App.4th 1228, 1238.)

 

Meet and Confer

 

Before filing a demurrer, the demurring party shall meet and confer in person or by telephone with the party who has filed the pleading subject to the demurrer and file a declaration detailing their meet and confer efforts.  (Code Civ. Proc., § 430.41(a).) However, an insufficient meet and confer process is not grounds to overrule or sustain a demurrer.  (Code Civ. Proc., § 430.41(a)(4).)

 

            The Declaration of Han W. Sir, Plaintiff’s counsel, states that the parties exchanged emails between September 8 and September 19, 2022, and conferred telephonically on September 22, 2022. (Declaration of Han W. Sir ISO Demurrer ¶¶ 2-6, Exhs. 1-3.) The parties were not able to reach an agreement on this issue, but stipulated to an extension of the deadline for Cross-Defendant’s responsive pleading on October 13, 2022, extending the deadline to October 27, 2022. (Id. ¶ 7, Exh. 4.) The Court therefore finds that Cross-Defendant has complied with the meet and confer requirements of Code of Civil Procedure section 430.41(a).

 

Uncertainty

 

Cross-Defendant demurs to the fourth, fifth, and sixth causes of action as uncertain.

 

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.)  "A demurrer for uncertainty will be sustained only where the complaint is so bad that defendant cannot reasonably respond--i.e., he or she cannot reasonable determine what issues must be admitted or denied, or what counts or claims are directed against him or her."  (Weil & Brown, Civil Procedure Before Trial (The Rutter Group) § 7:85 (emphasis in original).) "The objection of uncertainty does not go to the failure to allege sufficient facts."  (Brea v. McGlashan (1934) 3 Cal.App.2d 454, 459.)

 

            Cross-Defendant contends that each of the causes of action is subject to demurrer because it is uncertain. However, Cross-Defendant does not identify the basis for this contention. The Court therefore finds that Cross-Defendant has failed to justify the demurrer on this ground.

 

Fourth Cause of Action: Interference with Contractual Relations

 

            Cross-Defendant demurs to the fourth cause of action for interference with contractual relations for failure to state facts sufficient to constitute a cause of action.

 

            The elements which a plaintiff must plead to state the cause of action for intentional interference with contractual relations are (1) a valid contract between plaintiff and a third party; (2) defendant’s knowledge of this contract; (3) defendant’s intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage.” (Pacific Gas & Electric Co. v. Bear Stearns & Co. (1990) 50 Cal.3d 1118, 1126.)

 

            Cross-Defendant argues that this cause of action fails because it is barred by the economic loss rule and is insufficiently pled.

 

1.      Economic Loss Rule

 

Under the economic loss rule, “[w]here a purchaser’s expectations in a sale are frustrated because the product he bought is not working properly, his remedy is in contract alone, for he has suffered only ‘economic losses.’” (Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 988.) The economic loss rule “hinges on a distinction drawn between transactions involving the sale of goods for commercial purposes where economic expectations are protected by commercial and contract law, and those involving the sale of defective products to individual consumers who are injured in a manner which has traditionally been remedied by resort to the law of torts.” (Id.) Simply stated, the economic loss rule “prevents the law of contract and the law of tort from dissolving one into the other.” (Id.)  

 

The restrictions on contract remedies serve purposes not found in tort law—they protect the parties’ freedom to bargain over special risks, and they promote contract formation by limiting liability to the value of the promise. (Harris v. Atlantic Richfield (1993) 14 Cal.App.4th 70, 77.) This encourages efficient breaches, resulting in increased production of goods and services at a lower cost to society. (Id.) Because of these overriding policy considerations, the California Supreme Court has proceeded with caution in carving out exceptions to the traditional contract remedy restrictions. (Id.)  

 

Nevertheless, the most widely recognized exception to the economic loss rule is when a defendant’s conduct constitutes a tort as well as a breach of contract. (Id. at 78.) When one party commits fraud during the contract formation or performance, the injured party may recover in both contract and tort. (Id.)  

 

            Cross-Defendant offers two conclusory assertions in support of his position. First, Cross-Defendant argues that the factual allegations underlying the Cross-Complaint also underly its tort claims, and therefore that the tort claims are barred under the economic loss rule. Not so. When a defendant’s conduct violates a duty that arises independent of contract, the economic loss rule is not a bar to liability. (Harris, supra, at 78.) Here, Cross-Complainant has alleged that Cross-Defendant misrepresented his identity and his relationship to Cross-Complainant to disrupt the business relationships between Cross-Complainant and third parties. (FAXC ¶¶ 12-13.) Even if Cross-Defendant were a stranger to Cross-Complainant otherwise, these facts, if alleged, would give rise to one of those tort causes of action.

 

            Second, Cross-Defendant argues that the economic loss rule applies in any event because Cross-Defendant is in contractual privity with the identified third parties—namely other owners, the insurer, and the escrow firm. Our Supreme Court recently stated that when parties are in contractual privity, their relationship is governed by the contract, and the economic loss rule applies. (Sheen v. Wells Fargo Bank (2022) 12 Cal.5th 905, 937.) Cross-Defendant points to no allegations in the Cross-Complaint, however, which establish that he is in privity of contract with the third parties identified, nor does Cross-Defendant cite any authority for this claim. Cross-Defendant’s status as an owner is irrelevant to Cross-Complainant’s relations with other owners, and his relationship with the insurer and the escrow firm, based on his own characterization, is as an intended third-party beneficiary, which, by definition, does not establish privity. Cross-Defendant has therefore failed to show that this cause of action is barred by the economic loss rule.

 

2.      Sufficiency of Allegations

 

            Cross-Defendant argues that the allegations against him are insufficiently pled because the Cross-Complaint does not plead a valid contract for any of its identified bases for this cause of action. As the Cross-Complaint alleges that Cross-Defendant interfered with three sets of contractual relations— with the other owners, the insurer, and the escrow firm—Cross-Defendant must demonstrate that the Cross-Complaint does not allege a valid contract as to any of these relationship to prevail.

 

            Unfortunately for Cross-Defendant, a cursory review of the Cross-Complaint demonstrates that Cross-Complainant has alleged a contract between the owners and Cross-Complainant in the form of the Declaration of Covenants, Conditions, and Restrictions which is attached to the Cross-Complaint. (FAXC ¶ 7, Exh. A.) Thus, the Court finds that Cross-Defendant’s argument is without merit as to the relationship between the HOA and the other owners. As the Cross-Complaint alleges a valid contract with the other owners, the Court declines to address the adequacy of the other alleged contractual relationships.

 

            Accordingly, the Demurrer to the fourth cause of action is OVERRULED.

 

Fifth Cause of Action: Interference with Economic Advantage

           

            Cross-Defendant contends that the fifth cause of action fails for the same reasons as the fourth cause of action. As the Court has rejected this contention, Cross-Defendant’s Demurrer to the fifth cause of action is likewise OVERRULED.

 

Sixth Cause of Action: Unfair Competition

 

            Cross-Defendant demurs to the sixth cause of action for unfair competition for failure to state facts sufficient to constitute a cause of action.

 

            The Business and Professions Code prohibits “unfair competition,” defined as any “unlawful, unfair, or fraudulent business act or practice.” (Bus. & Prof. Code § 17200.) To bring a claim under this law, a person must have “suffered injury in fact and [have] lost money or property as a result of unfair competition.” (Bus. & Prof. Code § 17204.) To allege a viable cause of action under this law, the plaintiff must allege a predicate act. (See, e.g., Price v. Starbucks Corp. (2011) 192 Cal.App.4th 1136, 1147.) An injury in fact must be “actual or imminent, not just conjectural or hypothetical.” (Peterson v. Cellco Partnership (2008) 164 Cal.App.4th 1583, 1590.)

 

            Cross-Defendant first argues that this cause of action is barred by the economic loss rule. As the Court has already rejected this contention, the Court declines to consider it further.

 

            Cross-Defendant next argues that this cause of action is insufficiently pled because Cross-Complaint does not allege that the HOA is engaged in business. This contention is irrelevant. Under Business and Professions Code section 17204, a claim for relief under the unfair competition law may be brought by a board, officer, corporation, or association, or by a person. (Bus & Prof. Code § 17204.) Further, the term “person” for the purposes of the UCL includes “natural persons, corporations, firms, partnerships, joint stock companies, associations and other organizations of persons.” (Bus & Prof Code § 17201.) There is no requirement that the complainant be engaged in business to bring an action for unfair competition. The sixth cause of action is therefore not defective on this basis.

 

            Finally, Cross-Defendant argues that the Cross-Complaint does not allege that Cross-Defendant is engaged in any business and does not refer to any business practices. Once again, a cursory review of the Cross-Complaint defeats this argument. The Cross-Complaint alleges that Cross-Defendant is an attorney (FAXC ¶ 3) who used his position as an attorney to hold himself out as, among other things, his legal partner (¶ 12.3) or a representative of Cross-Complainant (¶ 13.) These allegations are incorporated into this cause of action. (FAXC ¶ 39.) The Cross-Complaint is therefore not defective in this respect regarding the sixth cause of action.

 

            Cross-Defendant has therefore, for the foregoing reasons, failed to demonstrate that the sixth cause of action does not allege facts sufficient to constitute a cause of action. Accordingly, the Demurrer to the sixth cause of action for unfair competition is OVERRULED.    

 

CONCLUSION:

 

            Accordingly, Cross-Defendant’s Demurrer to the First Amended Cross-Complaint is OVERRULED.

 

            Moving Party to give notice.

 

IT IS SO ORDERED.

 

Dated:  April 4, 2023                          ___________________________________

                                                                                    Theresa M. Traber

                                                                                    Judge of the Superior Court

 


            Any party may submit on the tentative ruling by contacting the courtroom via email at Smcdept47@lacourt.org by no later than 4:00 p.m. the day before the hearing. All interested parties must be copied on the email. It should be noted that if you submit on a tentative ruling the court will still conduct a hearing if any party appears. By submitting on the tentative you have, in essence, waived your right to be present at the hearing, and you should be aware that the court may not adopt the tentative, and may issue an order which modifies the tentative ruling in whole or in part.