Judge: Upinder S. Kalra, Case: 21STCV34242, Date: 2022-08-17 Tentative Ruling

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Case Number: 21STCV34242    Hearing Date: August 17, 2022    Dept: 51

Tentative Ruling

Judge Upinder S. Kalra, Department 51

HEARING DATE:   August 17, 2022                                             

CASE NAME:            Kasper Rune Sogaard, et al. v. Ridgeley Partners, LLC, et al.

CASE NO.:                21STCV34242

DEFENDANTS’ DEMURRER WITHOUT MOTION TO STRIKE

MOVING PARTY: Defendants Pacific Premier Bank and Dwayne Butler

RESPONDING PARTY(S): Plaintiffs Kasper Sogaard, et al.

REQUESTED RELIEF:

1.      An order sustaining the demurrer as to the seventh, tenth, and twelfth causes of action

TENTATIVE RULING:

1.      Demurrer as to the seventh and tenth causes of action is SUSTAINED, with leave to amend.

2.      Demurrer as to the twelfth cause of action is OVERRULED.

STATEMENT OF MATERIAL FACTS AND/OR PROCEEDINGS:

On September 16, 2021, Plaintiffs filed a Complaint against defendants Ridgeley Partners, LLC; Pacific Premier Bank dba Commerce Escrow Company; and Dwayne Butler, among other defendants. Defendants Pacific Premier Bank dba Commerce Escrow Company (“Commerce Escrow”) and Dwayne Butler (collectively, the “Defendants”) are the alleged escrow agents. The Complaint asserts the following 12 causes of action: (1) Specific Performance; (2) Breach of Contract; (3) Breach of Covenant of Good Faith and Fair Dealing; (4) Intentional Misrepresentation; (5) Concealment; (6) Violation of Civil Code § 1102, et seq.;  (7) Negligent Misrepresentation; (8) Violation of Civil Code § 1088; (9) Professional Negligence – Real Estate Agent; (10) Professional Negligence – Escrow Agent; (11) Professional Negligence – Title Officer; and (12) Declaratory Relief.

LEGAL STANDARD

A demurrer tests the sufficiency of whether the 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 any 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. (SKF Farms v. Superior Court¿(1984) 153 Cal. App. 3d 902, 905.)¿Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed.¿(CCP §§ 430.30, 430.70.)¿The only issue a demurrer is concerned with is whether the complaint, as it stands, states a cause of action.¿(Hahn, supra,¿147 Cal.App.4th¿at¿747.)

Judicial Notice:

The Court may take judicial notice of the existence of the records, but not the truth of matters asserted in such records. (Sosinsky v. Grant (1992) 6 Cal.App.4th 1548, 1565). As a result, although the court may take judicial notice that the documents exists, the Court may not take judicial notice of the truth of the facts in the documents.

            Additionally, Evidence Code only allows the Court to take judicial notice of certain types of documents. The court may take judicial notice of “official acts of the legislative, executive, and judicial departments of the United States and of any state of the United States,” “[r]ecords of (1) any court of this state or (2) any court of record of the United States or of any state of the United States,” and “[f]acts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy.” (Evid. Code § 452, subds. (c), (d), and (h).) The Evidence Code does not allow the Court to take judicial notice of discovery responses or parts of cases, such as depositions

Defendant requests the court take judicial notice of the following:

1.     “Additional Escrow Instructions and Terms (General Provisions)” (hereinafter referred to as the “General Provisions”).

The Request for Judicial Notice is DENIED. The Defendants are requesting judicial notice of this document for the truth of what is asserted, not that it exists.

Procedural Matter:

Meet and Confer:

The Declaration of Jonathan L. Endman indicates that he met and conferred with Christopher Delaplane on April 29, 2022, regarding this potential demurrer. The parties were unable to resolve the matter. (Dec. Endman ¶ 2).

Service:

The proof of service attached the Demurrer and reply indicates that Plaintiff’s counsel was served via email. The proof of service attached to the Opposition indicates service was effected via email.

ANALYSIS:

Defendants Pacific Premier Bank and Dwayne Butler demur on the grounds that the seventh, tenth and twelfth causes of action fail to state sufficient facts to constitutes causes of action.

1.      Negligent Misrepresentation

Defendants demur on the grounds that the seventh cause of action fails to state sufficient facts to constitute a cause of action for negligent misrepresentation for two reasons: (1) escrow instructions are not Defendants’ representations and (2) even so, Plaintiffs affirmed the instructions. 

“The elements of negligent misrepresentation are “(1) the misrepresentation of a past or existing material fact, (2) without reasonable ground for believing it to be true, (3) with intent to induce another's reliance on the fact misrepresented, (4) justifiable reliance on the misrepresentation, and (5) resulting damage.” (National Union Fire Ins. Co. of Pittsburgh, PA v. Cambridge Integrated Services Group, Inc. (2009) 171 Cal.App.4th 35, 50.)

In granting the first Demurrer, the Court offered guidance to Plaintiffs. Specifically, the Court stated that any amendments “must allege the facts that show the escrow instructions required the inclusion of Parcel 27 to the conveyed parties.” Plaintiffs added paragraph 18, alleging that by signing the Escrow Holder Acknowledgement, Defendants agreed to be bound by Paragraph 29 of the Purchase Agreement. Paragraph 29 referenced other paragraphs in the Purchase Agreement that would be part of the escrow instructions, including paragraph 6 that listed Parcel 27 as part of the sale. If that was the extent of Paragraph 29, Plaintiffs’ allegations may be sufficient to survive a Demurrer. However, a careful review of the entirety of Paragraph 29 undermines Plaintiffs’ allegations. Paragraph 29 explicitly states that in addition to using select paragraphs of the Purchase Agreement as escrow instructions, Escrow holder is also to use “any related counter offers and addenda, and any additional mutual instructions to close escrow.” Plaintiff attached a counter offer dated April 30, 2020 (Exhibit B), addenda—the  preliminary title report (Exhibit D)—; and additional mutual instructions dated June 16, 2020 (Exhibit C) to the Amended Complaint. Each of these documents were prepared subsequent to the April 25, 2020 Purchase Agreement and each expressly excluded Parcel 27 from the instructions. Notably, the amended Escrow instructions were acknowledged, signed and approved by Plaintiffs.  

Because the Defendants only had a duty to follow the later generated documents, which did not mention Parcel 27, the Plaintiffs have failed to allege that Defendants made a misrepresentation. “[A]n escrow holder “has no general duty to police the affairs of its depositors”; rather, an escrow holder's obligations are “limited to faithful compliance with [the depositors'] instructions.” (Summit Financial Holdings, Ltd. v. Continental Lawyers Title Co. (2002) 27 Cal.4th 1160A, 711, as modified on denial of reh'g (May 15, 2002).) “The agency created by the escrow is limited—limited to the obligation of the escrow holder to carry out the instructions of each of the parties to the escrow.” (Id.) Accordingly, once again, Plaintiffs have failed to establish that Defendants made any misrepresentation.

The Demurrer as to the Seventh Cause of Action is SUSTAINED, with leave to amend.

2.      Professional Negligence

Defendant demurs to the tenth cause of action on the grounds that Plaintiffs failed to establish that Defendants had a duty.

“To state a cause of action for professional negligence, a party must show “(1) the duty of the professional to use such skill, prudence and diligence as other members of the profession commonly possess and exercise; (2) breach of that duty; (3) a causal connection between the negligent conduct and the resulting injury; and (4) actual loss or damage resulting from the professional negligence.” (Giacometti v. Aulla, LLC (2010) 187 Cal.App.4th 1133, 1137.)

As stated above, the FAC fails to allege a breach of an establish a duty. The FAC allegation that Defendants breached the duty by failing to ensure the legal description included Parcel 27  is not a breach of a duty. (FAC ¶ 88). Defendants’ duty was to obey the amended instructions contained within the exhibits attached to the FAC, none of which included a reference to Parcel 27. What Plaintiffs are actually suggesting is that Defendants had a duty to ignore the amended escrow instructions and, instead, follow the initial instructions contained within the Purchase Agreement. An escrow agent has no duty to police the affairs of the depositors, thus, Defendants would have breached their duty if they had elected to follow the revoked, initial instructions. (Summit, supra, 27 Cal.4th at p. 711.) Thus, Plaintiffs have failed to establish that Defendants breached a duty.

Demurrer as to the Tenth Cause of Action is SUSTAINED, with leave to amend.

3.      Declaratory Relief

Defendant demurs to the twelfth cause of action on the grounds that this cause of action is duplicative of the other causes of action.

“To qualify for declaratory relief under section 1060, plaintiffs were required to show their action (as refined on appeal) presented two essential elements: “(1) a proper subject of declaratory relief, and (2) an actual controversy involving justiciable questions relating to the rights or obligations of a party.” (Lee v. Silveira (2016) 6 Cal.App.5th 527, 546) ““Declaratory relief operates prospectively to declare future rights, rather than to redress past wrongs.” (County of San Diego v. State of California (2008) 164 Cal.App.4th 580, 607.)

The FAC fails to sufficiently plead a cause of action for declaratory relief. Paragraph 95 states that there is a controversy between Plaintiffs and Defendants regarding determining their  “respective” obligations surrounding the purchase agreement, the Counter, the Legal Description Instruction and the “Prelim.” All of these, are past events, because escrow closed according to the FAC on June 25, 2020. (FAC ¶ 22.)

Demurrer as to the Twelfth Cause of Action is SUSTAINED without leave to amend

Leave to Amend:

Leave to amend should be liberally granted if there is a reasonable possibility an amendment could cure the defect.  (County of Santa Clara v. Superior Court (2022) 77 Cal.App.5th 1018,1035.)  The Plaintiff has the burden of demonstrating that leave to amend should be granted, and that the defects can be cured by amendment. (“Plaintiff must show in what manner he can amend his complaint and how that amendment will change the legal effect of his pleading.” Goodman v. Kennedy (1976) 18 Cal.3d 335, 349.) The opposition indicates Plaintiff’s “stand ready  to amend the FAC’ but provide no details or information on how they seek to accomplish this feat. In challenging the first Demurrer, Plaintiffs referenced a document that “they claim was part of the written instructions,” which indicated that Parcel 27 was part of the premises. The Court granted leave to amend to provide more detail regarding this document. In the FAC it is clear that the document in question was the Purchase Agreement, which the Court has indicated is insufficient since subsequent documents modified the initial instructions. No other documents have been even been alluded to by Plaintiff that can cure the defects noted in two Demurrers. Accordingly, leave to amend is Denied.

Plaintiffs’ request to amend to add a new cause of action for Breach of Duty is also denied as Plaintiff have yet to point to any duty that was breached.

Conclusion:

            For the foregoing reasons, the Court decides the pending motion as follows:

Demurrer as to the Seventh, Tenth, and Twelfth Causes of Action is SUSTAINED, without leave to amend.

Moving party is to give notice.

IT IS SO ORDERED.

Dated:             August 17, 2022                      __________________________________                                                                                                                Upinder S. Kalra

                                                                                    Judge of the Superior Court