Judge Upinder S. Kalra, Case 22STCV19860 2023-03-01 Tentative Ruling

MOVING PARTY: Defendants JW Property Services Inc., John Weiler, Jos Widjaja, and Coastline Equity Inc.

2. An order striking various portions of the Complaint concerning punitive damages.

On June 17, 2022, Plaintiffs Jeff Broido and Kara Lacey (“Plaintiffs”) filed a complaint against Defendants JW Property Services, Inc., Jos Widjaja, and John Weiler (“Defendants.”) The complaint alleged seven causes of action (1) Breach of Contract, (2) Breach of Implied Warranty of Habitability / Tenantability, (3) Breach of Implied Warranty of Quiet Enjoyment, (4) Negligence, (5) Violation of the Unfair Competition Law, Cal. Bus. & Prof. Code § 17200, et seq., (6) Concealment, and (7) Nuisance (Private). The complaint alleges that Plaintiffs entered a lease agreement with Defendants. The Lease contained no disclosures about mold. During Plaintiffs tenancy, they experienced various substandard living conditions, such as mold. Plaintiffs hired a mold inspection company, which determined that the premises had various toxin and molds. Despite Plaintiffs’ requests to remedy various issues, like the mold and termite droppings, Defendants have failed and refused to make needed repairs.

On October 10, 2022, Plaintiffs filed an Amendment to the Complaint, Fictious/Incorrect Name, naming Doe 1 as Coastline Equity, Inc.

On October 25, 2022, Defendants JW Property Services, Inc., Jos Widjaja, and John Weiler each filed a Demurrer with a Motion to Strike. Plaintiffs’ Oppositions were filed on November 14, 2022. Defendants’ Replies were each filed on February 22, 2023.

On December 5, 2022, Defendant Coastline Equity, Inc., filed a Demurrer with a Motion to Strike. Plaintiff’s Opposition to the Demurrer was filed on December 12, 2022. Defendant’s Reply was filed on February 22, 2023.

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.) “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. …. 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.)

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 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.)

Prior to filing a demurrer, the demurring party is required to satisfy their meet and confer obligations pursuant to Code of Civ. Proc. §430.41, and demonstrate that they so satisfied their meet and confer obligation by submitting a declaration pursuant to Code of Civ. Proc. §430.41(a)(2) & (3). In Carolyn Widman’s declaration, it provides that the parties met telephonically on October 20, 2022, to discuss the issues in the complaint that would require a demurrer and motion to strike. The parties were unable to come to a resolution. (Dec. Widman 2-4.)

Defendants each demur on the grounds that the sixth cause of action for concealment fails to state sufficient facts to constitute a cause of action.

Defendants argues that the Complaint fails to allege a required element: intent. The Complaint contains conclusory allegations about intent without any allegations or details about Defendant having the requisite intent. Paragraph 82 of the complaint merely states, “Defendant intend to deceive Plaintiff by concealing the facts.” Additionally, the Complaint makes conclusory statements without facts to demonstrate that Defendant knew or should have known about the alleged water damage and mold issues prior to Plaintiffs moving in.

Plaintiffs argue that the Complaint sufficiently pleads concealment because Defendant has exclusive control over the facts and evidence that demonstrate liability. The complaint sufficiently provides notice to Defendant: there was water damage and mold prior to Plaintiffs tenancy, Defendant more than likely knew about the water damage, Plaintiffs became aware of the mold in 2021, and Defendant “more likely than not intended to deceive Plaintiff by failing to attach the appropriate and proper mold addendum to the lease agreement.” (Opp. 7: 18-20; Comp. ¶¶ 11, 12, and 80 (Ex. A.)) Additionally, since landlords have a duty as a matter of law to inspect their rental property, the Complaint sufficiently alleges facts that “to support an inference that Defendants knew or should have known of any alleged water damage or mold issues prior to Plaintiffs moving into the subject property.” (Opp. 8: 5-8.)

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.)

Moreover, “the requirement that “[f]raud must be pleaded with specificity” applies equally to a cause of action for fraud and deceit based on concealment.” (Cansino v. Bank of America (2014) 224 Cal.App.4th 1462, 1472.)

“[W]hen averments of fraud are made, the circumstances constituting the alleged fraud must be specific enough to give defendants notice of the particular misconduct so that they can defend against the charge and not just deny that they have done anything wrong.” (Vess v. Ciba–Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir.2003) (internal quotations and citations omitted). The allegations “must be accompanied by ‘the who, what, when, where, and how’ of the misconduct charged.” (Arikat v. JP Morgan Chase & Co. (N.D. Cal. 2006) 430 F.Supp.2d 1013, 1022.) 157.)

After a review of the complaint, Plaintiffs have failed to sufficiently allege facts to establish concealment. Plaintiffs allege that Defendant failed to disclose severe water damage when they moved in or about 2008. (Complaint ¶11.) Following years of living at the location, they moved out in 2022 because of among other factors, mold that was discovered in 2021. (Complaint ¶¶15-20.) Plaintiff alleges that Defendants failed to disclose that However, Plaintiffs do not sufficiently allege that the subject property had water damage prior to the signing of the lease in 2008. (Complaint ¶ 78.) However, nowhere in the complaint is there an allegation that there was actual knowledge that the Subject Property had severe water damage prior to 2008. “Actual knowledge can, and often is, shown by inference from circumstantial evidence. In that case, however, “ ‘actual knowledge can be inferred from the circumstances only if, in the light of the evidence, such inference is not based on speculation or conjecture. Only where the circumstances are such that the defendant “must have known” and not “should have known” will an inference of actual knowledge be permitted.” (RSB Vineyards, LLC v. Orsi (2017) 15 Cal.App.5th 1089, 1097–1098.) In the Complaint, Plaintiffs only allege that they moved in and started having trouble, but only in August 2021 did testing for mold begin. Moreover, Plaintiffs also fail to allege facts about Defendant’s[1] intent to defraud.

Additionally, Plaintiff fails to allege reliance. Moreover, Plaintiff’s single sentence about intended to defraud is insufficient, as stated above, because fraud causes of action, even concealment claims, require specificity. Here, there are no specifics alleged; the who, what, where, when, how, and in what manner are not sufficiently alleged.

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

8. All other references of intentional and malicious conduct and any other reference to punitive damages in the Complaint

Defendant argues that the portions of the Complaint that seek or concern punitive damages must be stricken. The facts as alleged in the Complaint do not support punitive or exemplary damages; Defendant’s alleged conduct would not meet the requisite standards for punitive damages.

Plaintiff argues that the Complaint contains sufficient allegations for punitive damages. Specifically, Defendant failed and refused to make needed repairs to the Subject Property. Defendants acted voluntarily when they ignored Plaintiff’s requests.

Civil Code §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.” Subsection (c) of § 3294 defines malice as “conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.” Oppression is defined as “conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person's rights.” 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.”

To obtain punitive damages, a plaintiff must plead sufficient facts in support of punitive damages. (See Hilliard v. A.H. Robins Co. (1983) 148 Cal.App.3d 374, 391-92.) In addition, punitive damages are allowed only where “it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice.” (Civ. Code, § 3294, subd. (a).) Courts have viewed despicable conduct as conduct “so vile, base, contemptible, miserable, wretched or loathsome that it would be looked down upon and despised by ordinary decent people. (Scott v. Phoenix Schools, Inc., (2009) 175 Cal.App.4th 702, 715.)

“Conduct which may be characterized as unreasonable, negligent, grossly negligent or reckless does not satisfy the highly culpable state of mind warranting punitive damages.” Wollstrum v. Mailloux (1983) 141 Cal. App. 3d Supp. 1, 10. “Conduct which warrants punitive damages must be of ‘such severity or shocking character [as] warrants the same treatment as accorded to willful misconduct—conduct in which defendant intends to cause harm.’” (Id. quoting Nolin v. National Convenience Stores, Inc. (1979) 95 Cal. App. 3d 279, 286.).)

After a review of the complaint, the Court finds that Plaintiffs have failed to allege facts that could meet the standard, “clear and convincing evidence,” for punitive damages. Plaintiffs hired experts that first detected mold in or around August 2021. (Complaint ¶ 17.) While the presence of mold is serious and potentially dangerous, these allegations alone do not rise to the standard for punitive damages. Plaintiff has failed to allege facts demonstrating that the conduct can be characterized as grossly negligent or reckless. To the contrary, Plaintiff alleged that Defendant too retain experts to evaluate and the presence of mold in or around 2021. (Complaint ¶ 20.) Even assuming that Defendant acted unreasonably or negligently, taking action to investigate the claims as Defendants did here, does not demonstrate “wretched or loathsome” behavior

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 and will be able to plead further specific facts as to the who, what, when, where, and how required for fraud causes of action.

[1] As a note, Plaintiff also fails to indicate which Defendant. The cause of action is alleged against all three as well as Does 1 through 20. However, in paragraph 78 is states “Defendants JW represented to Plaintiff, and thereby Widjaja and Weiler,” but in the next paragraphs states “Defendant had exclusive knowledge…,” “at no time did Defendant provide…,” “Defendant intended to deceive…” Which Defendant? It is unclear from the allegations which specific conduct is asserted as having been done by which Defendant and when.