Judge Upinder S. Kalra, Case Number: 23STCV02659, Date: 2024-02-15 Tentative Ruling

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MOVING PARTY: Defendant Orbach-Araujo Family Trust; Defendants Compass California, Inc. and Rick Ojeda.

1. Demurrer to the First and Second Causes of Action in the FAC for failure to state facts sufficient to constitute a cause of action and for uncertainty.

On February 7, 2023, Plaintiffs Ryan Wenger and Yifat Resnick filed a Complaint against Defendants Obrach-Araujo Family Trust, Rick Ojeda, Compass California, Inc., Compass California II, Inc., and Compass California III, Inc. (Defendants) with two causes of action for: (1) Negligent Misrepresentation and (2) Negligence. According to the Complaint, this dispute concerns the sale of real property located at 1277 Calle De Sevilla, Los Angeles, California 90272 (the Property). Plaintiffs allege that Defendants misrepresented aspects of the property, including a built-in-barbeque and outdoor kitchen and trees.

On July 5, 2023, Defendants Orbach-Araujo Family Trust erroneously sued as Obrach-Araujo Family Trust filed an Answer and a Motion to Compel Arbitration.

On September 28, 2023, Defendant Rick Ojeda filed a Joinder to Defendant Compass’s demurrer.

On October 10, 2023, Defendant Orbach-Araujo Family Trust withdrew its motion to compel arbitration.

On November 1, 2023, Plaintiffs filed a First Amended Complaint (FAC) for the same causes of action.

On December 5, 2023, Defendants Compass California, Inc. and Rick Ojeda (Compass Defendants) filed a demurrer to the FAC.

On January 11, 2024, Defendant Orbach-Araujo Family Trust (Orbach-Araujo) filed a demurrer to the FAC.

On February 7, 2024, Defendants Compass California, Inc. and Rick Ojeda filed a reply.

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). Here, the Compass Defendants met the meet and confer requirement because counsel sent a letter, several follow-up emails, and ultimately received an email response from Plaintiffs’ counsel indicating no further need for discussion. (Anast Decl. ¶¶ 3 – 7.) Defendant Orbach-Araujo also sufficiently met and conferred. (Weiss Decl. ¶¶ 4-6.) Thus, the meet and confer requirement is met.

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.)¿

When considering demurrers, courts read the allegations liberally and in context, accepting the alleged facts as true. (Nolte v. Cedars-Sinai Medical Center (2015) 236 Cal.App.4th 1401, 1406.) Courts also consider exhibits attached to the complaint and incorporated by reference. (See Frantz v. Blackwell (1987) 189 Cal.App.3d 91, 94 (Frantz).)

The Compass Defendants contend that Plaintiffs failed to sufficiently allege particular facts supporting this cause of action. Specifically, Plaintiffs failed to allege which defendant made any representation, summarily conclude they justifiably relied on representations, and failed to allege how Plaintiffs’ reliance on the representations was a substantial factor in causing their harm. Additionally, the Compass Defendants contend that there was no duty to disclose facts which were visually apparent to Plaintiffs.

Defendant Orbach-Araujo also contends that Plaintiffs failed to sufficiently plead particular facts supporting this cause of action. Defendant Orbach-Araujo also contends that Plaintiffs failed to allege they performed their due diligence.[1]

Plaintiffs argue they did specifically plead who made the representations, including Defendant Ojeda as agent for Defendant Compass. Plaintiffs also argue that whether their reliance was reasonable is a question of fact. As for duty, Plaintiffs argue that Defendants did owe a duty to disclose all facts known materially affecting the value or desirability of the property and that whether Plaintiffs failed to discover those facts is a factual question.

The Compass Defendants reply that Plaintiffs did not identify the “defendants” who made the representations as alleged in the FAC, that Plaintiffs failed to plead facts that Plaintiffs actually relied on the representations or that it was reasonable reliance. As to duty, the Compass Defendants reply that pursuant to Civil Code § 2079.16, they were only required to disclose facts known to the agent that are not known to or within the diligent attention and observation of the parties. Additionally, they argue that Plaintiffs conceded the point about no duty to inspect public records or to verify any of the seller’s alleged statements because it was not raised in the opposition.

Defendant Orbach-Araujo replies that Plaintiffs’ contention that the HOA members knew their own and their neighbors’ property lines should be disregarded as a wild assumption and unsupported conclusion. Additionally, they argue that Plaintiffs argue this both ways: that the boundary lines were common knowledge to the entire community and that the Defendants actively concealed information about the boundary lines.

The elements of a claim for negligent misrepresentation are (1) the defendant made a false representation as to a past or existing material fact; (2) the defendant made the representation without reasonable ground for believing it to be true; (3) in making the representation, the defendant intended to deceive the plaintiff; (4) the plaintiff justifiably relied on the representation; and (5) the plaintiff suffered resulting damages. (Majd v. Bank of America, N.A. (2015) 243 Cal.App.4th 1293, 1307; National Union Fire Ins. Co. of Pittsburgh, Penn. V. Cambridge Integrated Services Group, Inc. (2009) 171 Cal.App.4th 35, 50.) As in negligence, there is also a requirement that legal duty exists imposed by statute, contract, or otherwise. (Bock v. Hansen (2014) 225 Cal.App.4th 215, 228.) This is a question of law. (Ibid.) Fraud and negligent misrepresentation must be pleaded with particularity, which means the pleading “must set forth how, when, where, to whom, and by what means the representations were made.” (SI 59 LLC v. Variel Warner Ventures, LLC (2018) 29 Cal.App.5th 146, 155; Charnay v. Cobert (2006) 145 Cal.App.4th 170, 184-185, fn. 14; see Foster v. Sexton (2021) 61 Cal.App.5th 998, 1028 [citing Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.])

Upon reviewing the FAC, the court agrees with the Defendants that Plaintiffs have not sufficiently plead negligent misrepresentation. First, the FAC does not include allegations identifying the “how, when, where, to whom, and by what means the representations were made.” Instead, the FAC alleges that “Defendants” made the representations “in their conversations with Plaintiffs and in their marketing materials they presented to Plaintiffs.” (FAC ¶ 19.) Also, as to the entity defendants, Plaintiffs have not alleged who spoke on behalf of each entity. (Perlas v. GMAC Mort., LLC (2010) 187 Cal.App.4th 429, 434 [requiring plaintiffs who claim fraud against a corporation to allege the names of the persons who made the misrepresentations, their authority to speak for the corporation, to whom they spoke, what they said or wrote, and when it was said or written.]) Plaintiffs also did not sufficiently allege facts that the Defendants owed a duty.[2] Indeed, the FAC background section alleges that Defendant Ojeda only owed a duty to Plaintiffs. (FAC ¶ 2.) There are no allegations that Defendant Compass or Defendant Orbach-Araujo owed a duty. Finally, Plaintiffs failed to plead that the alleged misrepresentations were a “substantial influence” on their actions. (Conroy v. Regents of Univ. of Calif. (2009) 45 Cal.4th 1244, 1256.) The only allegations state, in a conclusory manner, that “Plaintiffs reasonably relied on these representations.” (FAC ¶ 20.)

Accordingly, the court SUSTAINS both demurrers as to the first cause of action with leave to amend.

As noted above, the Compass Defendants contend that they did not owe Plaintiffs a duty because the encroachments were visible, there was no duty to inspect public records to discover the encroachment, and there was no duty to verify the seller’s statements.

Defendant Orbach-Araujo argues that Plaintiffs failed to allege the existence of a legal duty because the allegedly offending conditions were obvious and that Plaintiffs were on inquiry notice prior to close of escrow.

Aside from the above arguments about duty, Plaintiffs also argue that Defendants’ contentions are irrelevant to their negligence cause of action.

Defendant Orbach-Araujo replies that duty is a legal question appropriate for resolution on demurrer.

The basic elements of a negligence claim are: a duty on the part of the defendant towards the plaintiff; defendant’s breach of that duty; causation; and harm to plaintiff. (Kesner v. Sup. Ct. (Pneumo Abex, LLC) (2016 1 Cal.5th 1132, 1142.)

As discussed above, there are insufficient facts supporting Plaintiffs’ claim for negligence. First, there are two allegations concerning duty: that Defendant Ojeda owed a duty to Plaintiffs and that all Defendants “owed Plaintiffs a duty of care to exercise reasonable skill and care and a duty of honest and fair dealing and good faith.” (FAC ¶¶ 2, 23.)

Accordingly, the court SUSTAINS the demurrer as to the second cause of action with leave to amend.

[1] Defendant Orbach-Araujo relies on the California Residential Purchase Agreement and Joint Escrow Instructions dated February 21, 2021 (RPA). However, these are not attached to the FAC and the court is unaware of any authority allowing it to consider the terms of the RPA at the demurrer stage.

[2] Upon reviewing the FAC, Plaintiffs do not appear to be alleging statutory liability.