Judge: Upinder S. Kalra, Case: 22STCV11193, Date: 2022-08-11 Tentative Ruling
Case Number: 22STCV11193 Hearing Date: August 11, 2022 Dept: 51
Tentative Ruling
Judge Upinder S.
Kalra, Department 51
HEARING DATE: August
11, 2022
CASE NAME: Edgard
Marroquin v. American Honda Motor Co.
CASE NO.: 22STCV11193
DEFENDANT’S
DEMURRER AND MOTION TO STRIKE
MOVING PARTY: Defendant American Honda Motor Co
RESPONDING PARTY(S): Edgard Marroquin
REQUESTED RELIEF:
1. An
order sustaining the demurrer as to the second cause of action
2. An
order striking the punitive damages portion of the complaint
TENTATIVE RULING:
1. Demurrer
is OVERRULED.
2. Motion
to Strike is GRANTED, with leave to amend.
STATEMENT OF MATERIAL FACTS AND/OR PROCEEDINGS:
On April , 2022, Edgard Marroquin (“Plaintiff”) filed a
complaint against Defendant American Honda Motor Co., Inc., (“Defendant”). The
complaint alleged two causes of action: (1) Violation of Song-Beverly Act –
Breach of Express Warranty and (2) Fraudulent Inducement – Concealment. The
complaint alleges that Plaintiff purchased the Subject Vehicle with express and
limited warranties. During these warranties, the Subject Vehicle contained
defects and nonconformities. Plaintiff further alleges that these defects were
not sufficiently fixed when the Subject Vehicle was brought in for repairs.
On May 6, 2022, Defendant filed a Demurrer with a Motion to
Strike. Plaintiff’s opposition was filed on July 29, 2022.
Meet and Confer:
The Declaration of Theodore Dorenkamp III indicates that the
parties met and confer; Plaintiff’s counsel would not stipulate to dismissing
the fraudulent concealment claim. (Dec. Dorenkamp, Ex. B).
Service:
Proof of Service attached to the Demurrer indicates that
Plaintiff’s counsel was served via email. The Proof of Service attached to the
Opposition indicates that Defendant’s counsel was served via email.
LEGAL STANDARD
Demurrer
A demurrer for sufficiency tests 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 in context. 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; Weil & Brown, Civ.
Pro. Before Trial (The Rutter Group 2011) ¶7:8. “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 (Code Civ. Proc., §§ 430.30, 430.70). 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 147 Cal.App.4th at 747.
Motion to Strike
The court may, upon a motion, or at
any time in its discretion, and upon terms it deems proper, strike any
irrelevant, false, or improper matter inserted in any pleading. (Code Civ.
Proc., § 436(a).) The court may also strike all or any part of any pleading not
drawn or filed in conformity with the laws of this state, a court rule, or an
order of the court. (Id., § 436(b).)
The grounds for a motion to strike are that the pleading has irrelevant, false
or improper matter, or has not been drawn or filed in conformity with laws. (Id. § 436.) The grounds for moving
to strike must appear on the face of the pleading or by way of judicial notice.
(Id. § 437.) “When the
defect which justifies striking a complaint is capable of cure, the court
should allow leave to amend.” (Vaccaro v.
Kaiman (1998) 63 Cal.App.4th 761, 768.)
ANALYSIS:
Defendant argues that the Economic Loss Rule bars the second
cause of action for fraudulent concealment. Additionally, Defendant contends
that the second cause of action also fails because the Plaintiff did not allege
sufficient facts to constitute a cause of action. Defendant does not have a
fiduciary relationship with Plaintiff and therefore has no duty to disclose.
Further, Defendant argues that no partial representations were made to
Plaintiff, and the complaint does not allege facts that Defendant had exclusive
knowledge of a material fact or active concealment by Defendant.
The elements of an 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.” (Mktg. W., Inc. v. Sanyo Fisher (USA)
Corp. (1992) 6 Cal.App.4th 603, 612-613.)
“‘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.’ [Citations] . . . [O]ther than the first instance, in
which there must be a fiduciary relationship between the parties, “the other
three circumstances in which nondisclosure may be actionable presuppose[ ] the
existence of some other relationship between the plaintiff and defendant in
which a duty to disclose can arise. . . . ‘[W]here material facts are known to
one party and not to the other, failure to disclose them is not actionable
fraud unless there is some relationship between the parties which gives rise to
a duty to disclose such known
facts.’ [Citations] A relationship between the parties is present if there is
‘some sort of transaction between the parties. [Citations.] Thus, a duty to
disclose may arise from the relationship between seller and buyer, employer and
prospective employee, doctor and patient, or parties entering into any kind of
contractual agreement.’” (Hoffman v. 162
North Wolfe LLC (2014) 228 Cal.App.4th 1178, 1186-1187.)
Defendant argued that Plaintiffs could not
and cannot prove the existence of a special or transactional relationship
between Plaintiffs and Defendant so as to establish a duty to disclose facts.
Here, the Complaint alleges that Defendant had knowledge of the defects in
Plaintiff’s vehicle, as demonstrated by previous customer complaints, records
from the National Highway Traffic Safety Administration, and technical service
bulletins. (Complaint ¶¶ 33-70). This would constitute “superior knowledge.” Despite
this superior knowledge, Defendant still failed to disclose these defects to
Plaintiffs and other consumers. Further, Defendant made express warranties
under the SBA, is deemed to be a “manufacturer” since it is a warrantor, and thus
had a relationship of manufacturer and buyer. Therefore, Plaintiff has
sufficient pled a special relationship.
Here, the Complaint sufficiently pleads
fraudulent concealment. First, Defendant concealed a material fact. (Complaint
¶ 17-79, 90-93). Second, there was a duty to disclose. (Complaint ¶ 43,
111-115). Third, Defendant intentionally concealed these defects. (Complaint ¶
112,116). Fourth, Plaintiff was not aware of these defects (Complaint ¶ 80, 88,
119). Lastly, Plaintiff was damaged as a result. (Complaint ¶ 83, 105).
Next, the Court finds that Plaintiffs’ cause
of action for fraud by omission is not barred by the economic loss rule. Despite
the economic loss rule, “tort damages have been permitted in contract cases
where a breach of duty directly causes physical injury; for breach of the
covenant of good faith and fair dealing in insurance contracts; for wrongful
discharge in violation of fundamental public policy; or where the contract was
fraudulently induced. In each of these cases, the duty that gives rise to tort
liability is either completely independent of the contract or arises from
conduct which is both intentional and intended to harm.” (Robinson Helicopter Co., Inc. v Dana Corp. (2004) 34 Cal.4th 979,
989-990.)
Thus, tort damages are permitted in contract
cases where the contract has been fraudulently induced. Plaintiff alleges that
Defendant had prior knowledge of the defect in the Subject Vehicle, but
intentionally concealed those facts. (Complaint ¶ 111-121). Given that Plaintiffs
have pled facts sufficient to state a cause of action for fraud by omission and
have alleged that had they known of the defects Plaintiffs “would not have
purchased the Subject Vehicle,” the economic loss rule does not apply.
Therefore, Defendant’s demurrer to the second cause of
action for fraud is OVERRULED.
Motion to Strike:
Defendant moves to strike the prayer for punitive damages.
Defendant moves strike punitive damages on the grounds that
Plaintiff did not plead facts with specificity to constitute malice,
oppression, or fraud that punitive damages require, Plaintiff did not allege
that Defendant’s officers ratified conduct, and Plaintiff cannot recover
punitive damages under Song-Beverly.
CCP §3294 states that “(a) In 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.” Under CCP §3294(c)(3), fraud
is defined as “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.”
First, Defendant contends that the
punitive damages claim fails because the cause of action for fraud fails. However,
as stated above, Plaintiff has sufficiently pleaded fraud.
Second, Defendant argues that the Complaint does not allege
that Defendant’s officers or agents ratified the conduct raised in the
complaint. Subsection (b) of Civil Code § 3294 states:
An employer shall not be liable for
damages pursuant to subdivision (a), based upon acts of an employee of the
employer, unless the employer had advance knowledge of the unfitness of the
employee and employed him or her with a conscious disregard of the rights or
safety of others or authorized or ratified the wrongful conduct for which the
damages are awarded or was personally guilty of oppression, fraud, or malice.
With respect to a corporate employer, the advance knowledge and conscious
disregard, authorization, ratification or act of oppression, fraud, or malice
must be on the part of an officer, director, or managing agent of the
corporation.
Plaintiff contends that omissions
made by a dealership may be imputed to the manufacturer. Plaintiff cites to
Daniel v. Ford Motor Company. There, the court determined that a reasonable
fact finder could “could conclude
that Ford knew that its consumers depended at least in part on its authorized
dealerships for information about its vehicles and that Ford's authorized
dealerships would have disclosed the alleged rear suspension defect to
consumers if Ford had required it.” (Daniel v. Ford Motor Co. (9th
Cir. 2015) 806 F.3d 1217, 1227). Here, the complaint alleges that Plaintiff
reviewed marketing brochures, viewed commercials, and later relied on
statements made with Defendant’s agents and marketing brochures provided by
Defendant. (Complaint ¶ 6, 86-88).
However, Plaintiff has failed to
plead sufficient facts to allow punitive damages with respect to a corporate
employer. As required in CCP § 3294(b), this knowledge or ratification must be
on the part of an officer, director or managing agent. The Court in Cruz indicated that these individuals
are part of a group whose “intentions guide corporate conduct.” (Cruz v. HomeBase (2000) 83 Cal.App.4th
160, 167). “'Managing agents’ are employees who “exercise [ ] substantial
discretionary authority over decisions that ultimately determine corporate
policy.” [citation] “Corporate policy” is not defined by statute, nor in the
case law relating to punitive damages. Dictionary definitions of “policy”
include the following: “The general principles by which a government is guided
in its management of public affairs.” (Id.). Here, Plaintiff has failed to
allege sufficient facts that would indicate that this conduct was done by an
officer, director, or managing agent. Plaintiff does not indicate who Plaintiff
spoke to and how that person is or could be considered an officer, director, or
managing agent.
Lastly, Defendant contends that
Plaintiff cannot recover punitive damages under Song-Beverly. However, this
argument fails. The court in Anderson
indicated that punitive damages and statutory penalties under Song-Beverly are
allowed simultaneously. This is because the two situations are based on
different conduct. Anderson stated,
“the punitive damages were based on conduct underlying the fraud/CLRA causes of
action and took place before the sale. The civil penalty was based on
defendant's post-sale failure to comply with its Song-Beverly Act obligations
to replace the vehicle or make restitution when reasonable attempts to repair
had failed.” (Anderson v. Ford Motor Co.
(2022) 74 Cal.App.5th 946, 966, reh'g denied (Mar. 8, 2022), review denied (May
11, 2022)). Here, Plaintiff alleged fraud based on the concealment of defects
prior to the sale of the subject vehicle. (Complaint ¶ 11-121). The other cause
of action, which is based on Song-Beverly, was failure to repurchase or make
restitution. (Complaint ¶ 103).
Punitive
damages are allowed with cause of action based on Song-Beverly. However, while
Plaintiff did successfully plead fraud, it failed to plead sufficiently how
Defendant, as a corporation, ratified or authorized an officer, director, or
managing agent’s conduct, as required under CCP § 3294(b). The Motion to Strike
is GRANTED.
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. (Goodman v. Kennedy (1976)
18 Cal.3d 335, 349 [“Plaintiff must show in what manner he can amend his
complaint and how that amendment will change the legal effect of his
pleading.”].) The Plaintiff is likely able fix the defects, with respect to
pleading sufficient facts under subsection (b) of CCP § 3294. It is probable
that Plaintiff will be able to plead information if granted leave to amend,
such as who sold the car or made the representations.
Conclusion:
For
the foregoing reasons, the Court decides the pending motion as follows:
Demurrer is
OVERRULED.
Motion to Strike is GRANTED, with
leave to amend.
Moving party is to give notice.
IT IS SO ORDERED.
Dated: August
11, 2022 __________________________________ Upinder
S. Kalra
Judge
of the Superior Court