Judge: Yolanda Orozco, Case: 21STCV37073, Date: 2022-10-10 Tentative Ruling
Case Number: 21STCV37073 Hearing Date: October 10, 2022 Dept: 31
DEMURRER IS SUSTAINED; WITH MOTION TO STIKE IS GRANTED
BACKGROUND
On October 07, 2021, Plaintiff Santa Paseo, Inc. filed a Complaint against Defendant CAPREF Paseo, LLC and Does 1 to 50. The Complaint alleges causes of action for:
1) Breach of Contract
2) Promise Made without Intent to Perform
3) Negligent Misrepresentation
4) Fraudulent Concealment
5) Breach of Good Faith and Fair Dealing
6) Intentional Interference with Prospective Economic Advantage
7) Negligent Interference with Prospective Economic Advantage
On August 26, 2022, Defendant filed a Demurrer and a Motion to Strike Plaintiff’s Complaint.
On September 22, 022, Plaintiff filed an opposition. On October 03, 2022, Defendant filed a reply.
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 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.)¿¿¿
Any party, within the time allowed to respond to a pleading, may serve and file a notice of motion to strike the whole or any part thereof. (Code of Civ. Proc., § 435(b)(1); Cal. Rules of Court (CRC), Rule 3.1322(b).) The court may, upon a motion or at any time in its discretion and upon terms it deems proper: (1) strike out any irrelevant, false, or improper matter inserted in any pleading; or (2) strike out all or any part of any pleading not drawn or filed in conformity with the laws of California, a court rule, or an order of the court. (Code of Civ. Proc., § 436, subds. (a)-(b); Stafford v. Shultz (1954) 42 Cal.2d 767, 782 [“Matter in a pleading which is not essential to the claim is surplusage; probative facts are surplusage and may be stricken out or disregarded”].)¿¿¿
“Where the defect raised by a motion to strike or by demurrer is reasonably capable of cure, leave to amend is routinely and liberally granted to give the plaintiff a chance to cure the defect in question.” (CLD Construction, Inc. v. City of San Ramon (2004) 120 Cal.App.4th 1141, 1146.) The burden is on the complainant to show the Court that a pleading can be amended successfully. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.)¿
MEET AND CONFER
Defense counsel represents he emailed Plaintiff’s counsel regarding the demurrer on July 18, 2022, and July 26, 2022. (Bailey Decl. ¶ 2.) Defense counsel asserts that Plaintiff’s counsel has not contacted defense counsel regarding the demurrer. (Id.) Thus, the meet and confer requirement is met. (Code of Civ. Proc., § 430.41.)¿
DISCUSSION
Defendant demurrers to the entirety of Plaintiff’s Complaint.
Lack of Standing
Defendant asserts that Plaintiff lacks standing to assert a cause of action for breach of contract and tort claims.
Defendant CAPREF is the owner of a shopping center in Pasadena, California. It is undisputed that on or about August 10, 2018, the predecessor tenant and franchisee (Pasadena Food and Beverages, Inc. (“PMFB”)), entered into a lease (“Lease”) agreement with Defendant for the Subject Property. (Compl. ¶ 10, Ex. A [Lease].) Shortly after the lease was executed, Plaintiff purchased the restaurant from PMFB. Plaintiff assumed the Lease and Defendant, PMFB and Plaintiff approved the transaction by collectively signing a Collateral Assignment of the Lease and Guaranty. (Id. ¶ 12, Ex. B.) By virtue of the Collateral Assignment of the Lease and the Guaranty, PMFB assigned the Lease and Defendant accepted the assignment from PMFB to Plaintiff. (Id.)
Defendant correctly argues there is a standing issue. First, as Defendant points out, the assignee of the lease is “Paseo, Inc.” not Plaintiff. Plaintiff explains this discrepancy by stating that Paseo, Inc. does not exist and that it was a mistake and an oversight that the name was incorrectly listed since it was intended to be “Santa Paseo, Inc.” This explanation is not in the Complaint and the Court cannot consider it.
Second, Defendant argues that PMFB assigned its interest in the lease to Mr.Franchise in 2018, and therefore had no lease interest to assign to Plaintiff in 2019. Plaintiff again offers explanations about what the parties intended – e.g., it was never intended that Mr.Franchise would be the tenant – but nowhere are these “facts” alleged in the Complaint. While the Court must accept the facts and alleged in the Complaint, it is not required to accept the explanations, inferences or surmises offered by a plaintiff to counter a demurrer.
For the reasons stated, the Court SUSTAINS the Demurrer on the issue of standing with leave to amend.
While the Court need not reach the remaining challenges to the Complaint, the Court will do so to avoid ad seriatim demurrers on the same pleading and assuming arguendo that standing is not an issue.
First Cause of Action: Breach of Contract
“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. [Citation.]” (Richmond v. Hartley (2014) 224 Cal.App.4th 1182, 1186.)
Defendant asserts that Plaintiff’s breach of contract claims fails because as a condition precedent to Defendant’s performance, Plaintiff was required to plead that PMFB and Plaintiff performed all their obligations under the Lease and that Plaintiff suffered damages.
The Complaint does allege that all conditions precedents have been met. (Compl. ¶ 28). Plaintiff also alleges that Defendant not only failed to deliver the Property but also failed to obtain necessary permits for the subject property, a responsibility to be borne solely by Defendant. (Id. ¶¶ 19, 20.) Due to Defendant’s failure to obtain the permits, Plaintiff was unable to commence and complete improvements on the subject property to open the location for business. (Id.) In reliance on Defendant’s obtaining the permits, Plaintiff obtained architects, engineers, and other professionals in preparing to submit plans and specifications for the design, construction, and installation of all improvements on the subject property to Defendant. (Id. ¶ 22.) Consequently, Plaintiff incurred damages in the form of out-of-pocket expenses for submission of the plans, loss of use, loss of profits, consequential damages, and attorney’s fees and costs per the Lease. (Id. ¶ 32.)
The Parties do not dispute that a contract exists, and Plaintiff has pled sufficient facts to plead a cause of action for breach of contract. Accordingly, the demurrer is OVERRULED as to the 1st cause of action.
Fraud-Based Causes of Action
Defendant asserts that Plaintiff’s 2nd cause of action, promise without intent to perform, 3rd cause of action, negligent misrepresentation, and 4th cause of action for fraudulent concealment all sound in fraud and are not pled with the required specificity. “In California, fraud must be pled specifically; general and conclusory allegations do not suffice.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.)
“‘Promissory fraud’ is a subspecies of the action for fraud and deceit. A promise to do something necessarily implies the intention to perform; hence, where a promise is made without such intention, there is an implied misrepresentation of fact that may be actionable fraud.” (Lazar, supra, 12 Cal.4th at 638.) “Causes of action for intentional and negligent misrepresentation sound in fraud and, therefore, each element must be pleaded with specificity. (Daniels v. Select Portfolio Servicing, Inc. (2016) 246 Cal.App.4th 1150, 1166.
“[T]he elements of an action for fraud and deceit based on a 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.” (Boschman v. Home Loan Center, Inc. (2011) 198 Cal.App.4th 230, 248.) Specificity “necessitates pleading facts which show how, when, where, to whom, and by what means the representations were tendered.” (Lazar, supra, 12 Cal.4th at 631.)
Plaintiff asserts that any exception exists to the requirement of specificity for fraud claims when the defendant has superior knowledge. “We acknowledge that the requirement of specificity is relaxed when the allegations indicate that ‘the defendant must necessarily possess full information concerning the facts of the controversy’ (Citation) or ‘when the facts lie more in the knowledge of the opposite party[.]’ (Citation.)” (Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 158.)
Plaintiff alleges that beginning in March of 2020, via email and telephone, it had multiple communications with various agents of Defendant. Communications were had with Lance Taylor and Michael de Leon on or about June 5, 2020. (Compl. ¶ 24.) Plaintiff also communicated with Jeff Plauche and Jack Marshall on August 10, 2020, when Plaintiff was informed that Mr. Taylor was no longer employed by Defendant. (Id.) Plaintiff alleges it was told to put on hold any discussions regarding the subject property and all issues therein and instead focus on another location. (Id.)
Plaintiff should have knowledge of what specific promises were made, who made them and when they were made. For example, Plaintiff should know who specifically told Plaintiff to put on hold discussions about the subject property. As to the negligent misrepresentation and fraudulent concealment causes of action, Plaintiff does not specify what facts Defendant concealed about its ability to obtain the permits, what the specific representations were, who made them, and what facts it believes Defendant failed to disclose beyond the allegation that Defendant failed to obtain permits. (Compl. ¶ 46.)
Lastly, Defendant asserts that Plaintiff is barred from recovering in tort where the any alleged breach is only as to contractual obligations. As v. Superior Court (2002) 24 Cal. 4th 627, 643, superseded by statute on other grounds as stated in Rosen v. State Farm General Insurance Co. (2003) 30 Cal. 4th 1070, 1079-1080.) However, Plaintiff is correct in asserting that making affirmative representations with knowledge of undisclosed facts that materially qualify the facts disclosed or render the disclosed facts likely to mislead may be sufficient to sustain a cause of action for fraud or deceit based on concealment. (See Blickman Turkus, LP v. MF Downtown Sunnyvale, LLC (2008) 162 Cal.App.4th 858, 877.)
For the reasons stated, the demurrer to the 2nd, 3rd, and 4th cause of action is SUSTAINED WITH LEAVE TO AMEND.
Sixth and Seventh Causes of Action: Intentional and Negligent Interference with Prospective Economic Advantage.
To state a claim for the tort of intentional interference with prospective economic advantage (IIPEA), the claimant must allege: (1) an economic relationship between the claimant and some third party, with the probability of future economic benefit to the claimant; (2) the defendant or cross-defendant’s knowledge of the relationship; (3) intentional acts on the part of the defendant or cross-defendant designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm to the claimant proximately caused by the acts of the defendant. (Marsh v. Anesthesia Services Medical Group, Inc. (2011) 200 Cal.App.4th 480, 504.)
To state a claim for the tort of negligent interference with prospective economic advantage (NIPEA), the plaintiff must allege that: (1) an economic relationship existed between the plaintiff and a third party which contained a reasonably probable future economic benefit or advantage to plaintiff; (2) the defendant knew of the existence of the relationship and was aware or should have been aware that if it did not act with due care its actions would interfere with this relationship and cause plaintiff to lose in whole or in part the probable future economic benefit or advantage of the relationship; (3) the defendant was negligent; and (4) such negligence caused damage to plaintiff in that the relationship was actually interfered with or disrupted and plaintiff lost in whole or in part the economic benefit or advantage reasonably expected from the relationship. (North American Chemical Co. v. Sup. Ct. (1997) 59 Cal.App.4th 764, 788.)
Here, Plaintiff alleges an economic relationship existed between Plaintiff and its prospective customers to operate a restaurant at the subject property, a relationship that Defendant knew about and either intentionally or negligently caused Plaintiff to lose out on the economic benefit or advantage of operating a restaurant at the subject property. (Compl. ¶¶ 76-78, 85 87.)
For both IIPEA and NIPEA, the interference must be wrongful by some legal measure other than the fact of the interference itself. (Della Penna v. Toyota Motor Sales, U.S.A. (1995) 11 Cal.4th 376, 378. “[A]n act is independently wrongful if it is unlawful, that is, if it is proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard.” (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1159.)
In submitting the specifications to Defendant to improve the property and turn it into a restaurant, Defendant was aware of what purpose the subject property would serve and the fact that Plaintiff had prospective economic relationships that would be beneficial between itself and prospective customers.
As to the independently wrongful act, Plaintiff references the numerous allegedly false representations Defendant made that, as stated above, are not pled with specificity. Thus, Plaintiff cannot show that any interference was independently wrongful beyond the interference itself.
The Demurrer to the 6th and 7th causes of action is SUSTAINED WITH LEAVE TO AMEND.
Lastly, as Defendant does not specify why Plaintiff’s 5th cause of action for Breach of the Implied Covenant of Good Faith and Fair Dealing is subject to demurrer, the Court OVERRULES the demurrer as to the 5th cause of action except as to the issue of standing.
Motion to Strike
Defendant moves to strike Plaintiff’s claim for punitive damages. Although Plaintiff does not state it is seeking punitive damages, Plaintiff does not squarely deny that it is seeking consequential damages. Special damages, sometimes called consequential damages, are losses that do not arise directly and inevitably from the breach of the agreement and are instead secondary or derivative losses arising from circumstances where the loss is communicated to or known by the breaching party or were a matter of which the breaching party should have been aware of at the time of entering the contract. (See Greenwich S.F., LLC v. Wong (2010) 190 Cal.App.4th 739, 754.)
Plaintiff does not deny that it is seeking punitive damages but asserts that because the fraud causes of action are pled with specificity punitive damages are available. However, the demurrer as to the fraud causes of action was sustained.
Since the demurrer to Plaintiff’s causes of action is SUSTAINED WITH LEAVE TO AMEND, Defendant’s Motion to Strike is GRANTED WITH LEAVE TO AMEND.
CONCLUSION
The demurrer to the entire Complaint on the lack of standing is SUSTAINED WITH 20 DAYS LEAVE TO AMEND.
Demurrer to the 1st cause and 5th causes of action are OVERRULED.
Demurrer to the 2nd, 3rd, 4th, 6th, and 7th causes of action is SUSTAINED WITH LEAVE 20 DAYS TO AMEND.
Defendant’s Motion to Strike is SUSTAINED WITH 20 DAYS LEAVE TO AMEND.
Defendant to give notice.