Judge: Virginia Keeny, Case: 22VECV00545, Date: 2022-09-09 Tentative Ruling

Case Number: 22VECV00545    Hearing Date: September 9, 2022    Dept: W

ZEEBA COMPANY, INC. V. CENTURY AUTO SPORT, sean jacobi, et al.

CROSS-DEFENDANTS ZEEBA COMPANY INC., ET AL’S DEMURRER TO CROSS-COMPLAINANT CAS FINANCIAL SERVICES, INC’S CROSS-COMPLAINT

Date of Hearing:          September 9, 2022                 Trial Date:       None Scheduled; CMC                                                                                                                        9/9/22

Department:               W                                             Case No.:         22VECV00545 

Moving Party:             Cross-Defendants Zeeba Company Inc., Kayvon Marashi, and Kambiz                                             Marashi

Responding Party:       CAS Financial Services, Inc.  

Meet and Confer:        (Decl. of Kelvin J. Lo,  ¶3, filed 8/17/2022)

BACKGROUND 

            On April 19, 2022, Plaintiff Zeeba Company, Inc., a California corporation, filed a Complaint against Defendants Century Auto Sport, Sean Jacobi, and Does 1 through 10, alleging (1) breach of contract; (2) breach of implied covenant of good faith and fair dealing; (3) intentional misrepresentation; (4) negligent misrepresentation; (5) false promise; (6) replevin/claim and delivery conversion; (7) conversion; (8) tort of another claim for attorney’s fees; (9) Violation of Penal Code §496; (10) unfair competition. (Complaint, p. 1).

            On July 6, 2022, CAS Financial Services, Inc. (hereinafter “Cross-Plaintiff/Defendants”) filed a cross-complaint against Zeeba Company, Inc., Kayvon Marashi, Kambiz Marashi, Does [sic] 1-10 (hereinafter Cross-Defendants/Plaintiff”), alleging (1) breach of oral contract; (2) breach of covenant of good faith and fair dealing; and (3) fraud (intentional misrepresentation). (Cross-Complaint, p. 1).

            The original complaint filed by Zeeba Company Inc.  arose from a transaction made between Plaintiff and Defendants in which Plaintiff agreed to sell and Defendants agreed to purchase three vehicles for $7,500, $9,200, and $22,750. (Complaint, ¶12). Prior to paying for the vehicles, Plaintiff alleges that Defendants removed the three vehicles from Plaintiff’s vehicle lot without Plaintiff’s knowledge or consent, despite the terms of the Sale Agreement stating that “payment in full is required prior to delivery to Purchaser [Century] and that vehicle will not be delivered until full payment has been received.” (Id. at ¶ 13). To date, Plaintiffs allege that Defendants “. . . continue to hold the vehicles hostage, refuse to pay for the vehicles or sign the necessary paperwork for titles to be released, and have even demanded that Zeeba pay ‘storage fees’ for the vehicles by the Defendants.” (Id. at ¶16).

            Cross-Plaintiff alleges that Cross-Defendants did not present clean title of the three vehicles they had purchased and for several months thereafter, would still not produce clean legal titles to the three vehicles (“the vans”)(Cross-Complaint, ¶12-14).

MOVING PAPER ARGUMENTS

            Cross-Defendants demur to Cross-Plaintiff’s First Cause of Action for breach of oral contract and Second Cause of Action for  breach of covenant of good faith and fair dealing on the grounds that both causes of action fail to state facts sufficient to constitute causes of action, pursuant CCP § 430.10(e).

OPPOSITION

            On August 26, 2022, Cross-Plaintiffs filed their Opposition, arguing that for their First Cause of Action, sufficient facts were alleged to plead breach of the oral agreement between the parties. (Opposition, p. 4). Furthermore, as plead, the Second Cause of Action explicitly states how Cross-Defendants prevented Cross Plaintiff CAS from receiving the benefits under the oral contract. (Id. at p. 5). On these grounds, Cross-Plaintiffs arguing that this is sufficient to overrule this demurrer.

[TENTATIVE] RULING 

CROSS-DEFENDANTS’ DEMURRER TO CROSS-COMPLAINANTS’ FIRST CAUSE OF ACTION  FOR BREACH OF ORAL CONTRACT  AND SECOND CAUSE OF ACTION FOR BREACH OF COVENANT OF GOOD FAITH AND FAIR DEALING IS SUSTAINED WITH LEAVE TO AMEND.

LEGAL STANDARD 

            A demurrer for sufficiency tests whether the complaint states a cause of action. (See Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747).¿When considering demurrers, courts read the allegations liberally and in context. (Wilson v. Transit Authority of City of Sacramento (1962) 199 Cal.App.2d 716, 720-21.) 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 pleading alone, and not on the evidence or facts alleged.” (E-Fab, Inc. v. Accountants, Inc. Servs. (2007) 153 Cal.App.4th 1308, 1315.) As such, the court assumes the truth of the complaint’s properly pleaded or implied factual allegations. (Id.) However, it does not accept as true deductions, contentions, or conclusions of law or fact.  (Stonehouse Homes LLC v. City of Sierra Madre (2008) 167 Cal.App.4th 531, 538.) A demurrer may be sustained “only¿if the complaint fails to state a cause of action under any possible legal theory.” (Sheehan v. San Francisco 49ers, Ltd.¿(2009) 45 Cal.4th 992, 998.)         

            A general demurrer may be taken to a complaint where “[t]he pleading does not state facts sufficient to constitute a cause of action,  or as used in this subdivision, is “uncertain,” which includes ambiguous and unintelligible. (Code of Civ. Proc. § 430.10(e), (f)).

            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.) 

ANALYSIS 

First Cause of Action for Breach of Oral Contract

            Cross-Defendants demur to Cross-Plaintiff’s First Cause of Action for Breach of Oral Contract on the grounds that that the cross-complaint makes the bare bones allegation that that CAS “has fulfilled all of its obligations under the Purchase Agreements” without actually alleging what those obligations were and how CAS fulfilled them. (Cross-Complaint, ¶ 20.) Because these are merely conclusions of law and not ultimate facts, and the cross-complaint contains no further explanation, moving party argues that the first cause of action does not comply with the rules of pleading. (Demurrer, p. 5: Lines 19-23).

            “To prevail on a cause of action for breach of contract, the plaintiff must prove (1) the contract, (2) the plaintiff’s performance of the contract or excuse for nonperformance, (3) the defendant’s breach, and (4) the resulting damage to the plaintiff.” (Richman v. Hartley (2014) 224 Cal.App.4th 1182, 1186 [169 Cal.Rptr.3d 475].)

            It is correct that cross-complainant merely alleges that both parties “. . . voluntarily entered into an oral contract to sell and purchase the vans,” that Cross-Plaintiff “. . . has fulfilled all of its obligations under the Purchase Agreements, except for those obligations and conditions excused, waived, or made impossibly by the conduct of Cross-Defendants,” and that Cross-Defendants “. . . materially breached the Purchase Agreements by not possessing and providing clean legal titles to the vans.” (Cross-Complaint at ¶19-22).

            Cross-complainant has not alleged sufficient facts that Cross-Defendant ever had an enforceable contract with CAS.  It is not stated who made the oral agreement, when it was entered and what the terms of the agreement were.  Although CAS alleges that  they “fulfilled all of its obligations under the Purchase Agreements,” there is no explanation of the terms of the oral agreement, nor how it was breached, or what CAS did to perform under the alleged contract. Absent sufficiently plead facts to demonstrate the existence of an actual contract, Cross-Plaintiff cannot maintain a cause of action for a breach of contract.

            Therefore, Cross-Defendants’ demur to Cross-complainantf’s First Cause of Action for Breach of Oral Contract is SUSTAINED with leave to amend based on a failure to allege sufficient facts to maintain a cause of action.

Second Cause of Action for Breach of Covenant of Good Faith and Fair Dealing

            “There is an implied covenant of good faith and fair dealing in every contract

that neither party will do anything which will injure the right of the other to

receive the benefits of the agreement.” (See Comunale v. Traders & General Ins. Co.

(1958) 50 Cal.2d 654, 658 [328 P.2d 198], internal citation omitted).

            Here, a cause of action for breach of the implied covenant of good faith and fair dealing rests on the existence of an actual contract. “There is an implied covenant of good faith and fair dealing in every contract that neither party will do anything which will injure the right of the other to receive the benefits of the agreement.” (See Comunale v. Traders & General Ins. Co.

(1958) 50 Cal.2d 654, 658 [328 P.2d 198], internal citation omitted). However, based on the analysis supra, it cannot be determined that an actual contract ever existed between Cross-complainant CAS and Cross-Defendant. “There is no obligation to deal fairly or in good faith absent an existing contract. If there exists a contractual relationship between the parties . . . the implied covenant is limited to assuring compliance with the express terms of the contract, and cannot be extended to create obligations not contemplated in the contract.” (Racine & Laramie, Ltd., supra, 11 Cal.App.4th at p. 1032, internal citations omitted.)

            Because it has not been demonstrated that an actual contract exists, Cross-Defendants’ demur to Cross-complainant’s Second Cause of Action for Breach of Covenant of Good Faith and Fair Dealing is SUSTAINED with leave to amend.

CONCLUSION 

                 Cross-Defendants’ Demurrer to Cross-Complainants’ First Cause of Action for Breach  of Oral Contract and Second Cause of Action for Breach of Covenant of Good Faith and Fair Dealing is SUSTAINED with 30 days leave to amend.