Judge: Yolanda Orozco, Case: 21STCV37073, Date: 2023-02-03 Tentative Ruling
Case Number: 21STCV37073 Hearing Date: February 3, 2023 Dept: 31
DEMURRER WITH MOTION TO STRIKE
TENTATIVE RULING
Defendant’s Demurrer is SUSTAINED WITH 30 DAYS LEAVE TO AMEND.
Defendant’s Motion to Strike is GRANTED WITH 30 DAYS LEAVE TO AMEND.
Background
On October 07, 2021, Plaintiff Santa Paseo, Inc. filed a Complaint against Defendant CAPREF Paseo, LLC (“Defendant”) and Does 1 to 50.
The operative First Amended Complaint (FAC) 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 October 10, 2022, the Demurrer to the Complaint was SUSTAINED WITH LEAVE TO AMEND.
On December 28, 2022, Defendant filed a Demurrer with a Motion to Strike the FAC.
Plaintiff filed a reply on January 19, 2023.
Defendant filed a reply on January 27, 2023.
MEET AND CONFER
Before filing a demurrer or motion to strike, the moving party must meet and confer in person or by telephone with the party who filed the pleading to attempt to reach an agreement that would resolve the objections to the pleading. (Code Civ. Proc., §§ 430.41, 435.5.) “Any determination by the court that the meet and confer process was insufficient shall not be grounds to overrule or sustain a demurrer.” (Code Civ. Proc., § 430.41, subd. (a)(4).)
The meet and confer requirement has been met. (Bailey Decl. ¶ 2.)
Legal Standard
A. Demurrer¿¿¿
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A demurrer can be used only to challenge defects that appear on the face of the pleading under attack or from matters outside the pleading that are judicially noticeable.¿ (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)¿ “To survive a demurrer, the complaint need only allege facts sufficient to state a cause of action; each evidentiary fact that might eventually form part of the plaintiff’s proof need not be alleged.”¿ (C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872.)¿ For the purpose of testing the sufficiency of the cause of action, the demurrer admits the truth of all material facts properly pleaded.¿ (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967.)¿ A demurrer “does not admit contentions, deductions or conclusions of fact or law.”¿ (Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 713.)¿¿
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B. Motion to Strike¿¿
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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”].)¿¿¿
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C. Leave to Amend¿¿¿
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“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.)¿¿
Request for Judicial Notice (if applicable)
The Court may take judicial notice of “official acts of the legislative, executive, and judicial departments of the United States and of any state of the United States,” “[r]ecords of (1) any court of this state or (2) any court of record of the United States or of any state of the United States,” and “[f]acts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy.” (Evid. Code § 452, subds. (c), (d), and (h).) However, the court may only judicially notice the existence of the record, not that its contents are the truth. (Sosinsky v. Grant (1992) 6 Cal.App.4th 1548, 1565.)
Defendant requests judicial notice of the following:
1. Grant Deed recorded with the Los Angeles County Recorder’s Office on October 27, 2022 as Instrument No. 2022-1024177; a true and correct copy is attached as Exhibit 1.
2. “Business Search – Results” printout from the California Secretary of State’s website for a search done for the entity “Santa Paseo, Inc.” on December 28, 2022.; a true and correct copy is attached as Exhibit 2.
3. Frist Amended Complaint filed by plaintiff in Los Angeles County Superior Court, Case No. 20STVC48603; a true and correct copy is attached as Exhibit 3.
A court may take judicial notice of a recorded deed. (Ragland v. U.S. Bank National Assn. (2012) 209 Cal.App.4th 182, 194.) The Court may also take judicial notice of a government website. (See Wood v. Superior Court of San Diego County (2020) 46 Cal.App.5th 562, 580 [“By separate order, we granted Crunch's request for judicial notice of several pages from DFEH's website and other DFEH public statements. While we may not judicially notice the truth of any statement in these materials, we may take notice of the fact that they were made to the public.”].)
Defendant’s request for judicial notice is GRANTED.
Discussion
Allegations in FAC
Plaintiff Santa Paseo, Inc alleges that on or about August 10, 2018, Pasadena Mediterranean Food and Beverages, Inc. (“PMFB”), entered into a lease (the “Lease”) with Defendants. (FAC ¶ 10, Ex. A.)
PMFB was to be a franchisee of Panini Kabob Grill and as required by franchisees of Panini Kabob Grill, a Collateral Assignment of the Lease was requested in the event the franchise defaulted or the franchisor purchased the franchise back, the assignment streamlined the vetting and approval process “and in essence Landlord consent would not be necessary.” (FAC ¶ 11.)
PMFB later decided it no longer wanted to pursue a franchise opportunity with Panini Kabob Grill and franchisor, Mr. Franchise, Inc., purchased the franchise back, and converted the location into a corporate location assigning the lease to Plaintiff. (FAC ¶ 12.)
In purchasing the franchise back, the franchisor and PMFB exercised their rights under the Collateral Assignment of the Lease and Plaintiff took over the Lease “in which DEFENDANTS requested another corporate location of Panini Kabob Grill to execute a guaranty as well as the Execution of an Assignment of Lease by PMFB and Plaintiff.” (FAC ¶ 12, Ex. B.)
In assigning the lease back to franchisor, Mr. Franchise, Inc. elected to have the Lease assigned to the entity Santa Paseo Inc, but due to a drafting error, the parties inadvertently omitted “SANTA” and simply identified the assignee as Paseo, inc. (FAC ¶ 13.) “Hence, minus the inadvertent mistake by the parties, it was quite clear that SANTA PASEO, INC. was to be the assignee and new tenant and MRFRANCHISE was simply the Franchisor and does not and during all relevant times herein has never been a tenant to any lease including the current Lease in question. MRFRANCHISE was simply the conduit for the Collateral Assignment and in the event franchisee would default on the Lease[.]” (FAC ¶13.)
Plaintiff asserts that Defendant breached Section 1.01D of the Lease whereby Plaintiff was to obtain possession of the premise be either “the earlier of 160 days after the effective date, or the date the PLAINTIFF noticed DEFENDANTS that it had obtained its necessary permits.” (FAC ¶¶ 14-16.)
Plaintiff also asserts Defendant breached Section 3.01 of the Lease which states “Landlord shall perform all work reasonably necessary to deliver the Premises to Tenant[.]” (FAC ¶¶ 17, 20, 21.) Section 10.01 also states “Landlord shall be responsible for complying (or causing compliance) with all applicable laws, statutes, ordinances and regulations of federal, state, county and municipal authorities[.]” (FAC ¶¶ 17, 20, 21.) Therefore, the commencement of the lease has not occurred because delivery has never been made to Plaintiff. (FAC ¶ 18.) Moreover, Section 2.09 required both Parties to execute a memorandum of the lease, but this was not done. (FAC ¶ 19.) Defendant’s agents assert that “no permits are in sight.” (FAC ¶¶ 20, 21.)
Section 3.02 of the Lease required Plaintiff to submit plans and specifications for the design, construction, and installation of all improvements to Defendants, within 45 days following the effective date of the Lease. (FAC ¶ 22.) In reliance on Defendant performing all of its obligations, Plaintiff obtained architects, various engineers, and other professionals in preparation and submission of all such plans and specifications. (FAC ¶ 23.)
In or about March 2020, due to the COVID-19 virus, Plaintiff reached out to Defendant regarding the issues with the Lease and the damages Plaintiff has obtained. (FAC ¶ 25.) Specifically, Plaintiff’s Chief Executive Officer, Mike Ralipoor, reached out to various agents of Defendants, including Lance Taylor ad Michael de Leon, on or about June 05, 2020, and Jeff Plauche and Jack Marshall on August 10, 2020, upon learning that Mr. Taylor would no longer be with Defendant and was departing. (FAC ¶ 25.) Defendant is alleged to have asked Plaintiff to put on hold any discussion regarding the subject premises and focus on its other location in Burbank, California and Plaintiff complied with the request. (FAC ¶¶ 25, 26.)
Plaintiff now sues Defendant 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; and (7) Negligent Interference with Prospective Economic Advantage.
Defendant demurrers to Plaintiff’s FAC.
I. Demurrer to FA
Inapplicability of Corp. Code, § 2105
Defendant asserts that the assignment of the Lease to Plaintiff was invalid because Plaintiff was not registered with the California Secretary of State and was not authorized to conduct business in California. (RJN Ex. 2.)
“A foreign corporation is prohibited from transacting intrastate business in California without first obtaining a certificate of qualification from the Secretary of State.” (See United Systems of Arkansas, Inc. v. Stamison (1998) 63 Cal.App.4th 1001, 1007 citing Corp. Code, § 2105, subd. (a).) Failure to abide by section 2105 may subject a foreign corporation “to a penalty of twenty dollars ($20) for each day that unauthorized intrastate business is transacted[.]” (Corp. Code, § 2203.)
Defendant fails to point to any legal authority holding that Plaintiff’s failure to register with the California Secretary of State, renders any subsequent action by the corporation void after it becomes registered. The penalizing provisions of section 2203 have no application once a foreign corporation abides by section 2105. (United Medical Management Ltd. v. Gatto (1996) 49 Cal.App.4th 1732, 1740 [“Section 2203, subdivision (c) is literally and unambiguously inapplicable to actions commenced after compliance with section 2105.”].) At the time this action commenced, Plaintiff was registered with the California Secretary of State.
Therefore, the demurrer is OVERRULED as to Plaintiff’s failure to register with the California Secretary of State at the time Plaintiff allegedly assumed the Lease.
Lack of Standing
Defendant asserts that Plaintiff lacks standing to assert a cause of action for breach of contract and tort claims because Plaintiff never obtained Defendant’s consent to the Assignment, making the Assignment void.
a. Failure to Allege Validity of Assignment of Lease
The Court may consider the Lease and Collateral Assignment of the Lease as they are attached to the FAC and are part of the pleadings. (See Hoffman v. Smithwoods RV Park, LLC (2009) 179 Cal.App.4th 390, 400 [finding that the complaint’s exhibits may be considered when reviewing the sufficiency of a complaint against a general demurrer.].) On demurrer, no extrinsic evidence is permitted to interpret a contract. (See Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 114–115.) Accordingly, the demurrer will be overruled if the contract presents material factual issues that require evidentiary resolution. (See Del E. Webb Corp. v. Structural Materials Co. (1981) 123 Cal.App.3d 593, 605.)
To the extent any allegations in the FAC are inconsistent with the attached exhibits or matters judicially noticed, those allegations will be disregarded. (See Del E. Webb Corp, supra, 123 Cal.App.3d at 606; see also City of Chula Vista v. County of San Diego (1994) 23 Cal.App.4th 1713, 1719 [“Accordingly, judicially noticeable facts may supersede any inconsistent factual allegations contained in a complaint.”].) “But where a plaintiff himself sets forth the contract in the terms in which it is written, and then proceeds by averment to put a false construction upon the terms, the allegations, as repugnant to the terms, should be regarded as surplusage, to be struck out on motion.” (Stoddard v. Treadwell (1864) 26 Cal. 294, 303.)
Thus, a pleading valid on its face may nevertheless be subject to demurrer when matters judicially noticed by the Court render the complaint meritless. “Under the doctrine of truthful pleading, the courts ‘will not close their eyes to situations where a complaint contains allegations of fact inconsistent with attached documents, or allegations contrary to facts that are judicially noticed.’” (Hoffman, supra, 179 Cal.App.4th 390, 400.)
Plaintiff alleges that the legal effect of the Collateral Assignment of the Lease streamlined the lease process such that “in essence Landlord consent would not be necessary.” (FAC ¶ 11.) Plaintiff also alleges Defendant requested Plaintiff execute a guaranty and that both Mr. Franchise, Inc, and PMFB exercised their right under the Collateral Assignment of the Lease by assigning the Lease to Plaintiff. (FAC ¶ 12, Ex. B.)
On September 10, 2018, Mr. Franchise, Inc. as “Franchisor” along with Defendant as “Landlord” executed a “CONSENT AND AGREEMENT BETWEEN LANDLORD AND FRANCHISOR REGARDING COLLATERAL ASSIGNMENT OF LEASE” whereby Franchisor and Landlord “agree that Franchisor may provide certain a franchising arrangement dated June 9, 2017, as may be amended, modified, or restated from time to time (‘Franchise Agreement’)” to PMFAB (“Tenant”) “as it relates to Tenant’s business involving the above referenced lease (the ‘Lease’) and the premises. . .” (FAC Ex. B [Consent and Agreement at p. 1 of 5].)
Regarding “Assignment” the Collateral Assignment of Lease signed September 10, 2018 states that the Franchisor (aka Mr. Franchise, Inc.) “may succeed to the interest of Tenant pursuant to an assignment of the Lease under section XVII of the Lease, and notwithstanding anything contained in the Lease to the contrary, Landlord’s consent shall not be required provided that Franchisor assumes in writing all of Tenant’s obligations under the Lease accruing from and after the effective date of such assignment.” (FAC Ex. B [Consent and Agreement at p. 2 of 5].)
The FAC never specifically alleges that Franchisor/Mr. Franchise Inc. executed or approved the assignment. In fact, the “Assignment and Assumption of the Lease Agreement” states that the assignment is between PMFB/Tenant and Paseo, Inc./Plaintiff.
Moreover, the “Assignment and Assumption of the Lease Agreement” contemplates that the Landlord will approve the Assignment:
“WHEREAS, Landlord by the execution of the ‘Approval and Release of Tenant’ under this Agreement, set forth below, has provided its written consent to this Assignment and Assumption of the Lease Agreement by and between Assignor and Assignee; and . . .”
(FAC Ex. B.)
The attached “LANDLORD’S APPROVAL AND RELEASE” is unsigned by Defendant. The FAC never alleges that Defendant’s consent was obtained. In fact, the FAC asserts Landlord consent was not necessary. (FAC ¶11.) This is in direct contradiction to the Lease and the Collateral Assignment of the Lease.
Section XVII of the Lease is titled “Assignment and Subletting” sets outs under what conditions may the lease be assigned by either the Tenant/PMFB or the Franchisor/Mr. Franchise.
Section 17.01 (a) states that Tenant (aka PMFB) has the right to assign its interest in the lease “with the consent of Landlord[.]” (FAC Ex. A.) This means PMFB must provide a “Transfer Notice” to Landlord under Section 17.01(b).
PMFB may transfer its entire interest to Franchiser/Mr. Franchise, Inc. without Landlord’s consent if Franchisor assumes in writing all of Tenant’s obligations under the Lease. (FAC Ex. A [Lease § 17.01(c).) Franchisor/Mr. Franchise, Inc. may sublease without the Landlord’s prior consent if Franchisor notifies the Landlord of the proposed sublease at least ten (10) days prior to the effective date of the said sublease. (Id.)
Section 17.02 permits Tenant/PMFB to grant an “Affiliate of Tenant” license to operate Tenant’s business provided that Landlord receives “advance written notice.” (FAC Ex. A.) Failure to comply results in an Event of Default for Tenant. (Id.)
“Notwithstanding any attempted or purported Tenant Transfer or the occupancy of the Premises by any person or party other than Tenant, Landlord shall have the right to accept or collect Rent from any such assignee, subtenant, or other occupant without being deemed to have consented to any Tenant Transfer or consented to such occupancy by any other person or party.”
(Id.)
Section 22.07 titled “Successor and Assigns” states:
“This Lease shall inure to the benefit of and be binding upon the heirs, executor, administrators, successors and assigns of Landlord and the successors and the successors and assigns of Tenant; provided, however, that this Section 22.08 shall not be deemed to afford Tenant any right to any Tenant Transfer except in accordance with and subject to Article XVII.”
Although Defendant fails to point to a provision in the Lease or Collateral Assignment that makes any assignment void if the assignment is executed without Landlord’s consent, the Lease does state, in Section 22.07, that no rights are transferred if the assignment is not done in accordance with Article XVII.
Here, Plaintiff has failed to allege that the assignment of the lease was executed in compliance with Article XVII or that the assignment was valid. Without a pleading and facts supporting the allegations that the assignment of the Lease was valid, Plaintiff cannot allege it has rights under the Lease. Plaintiff bears the burden of proving it was assigned rights and what those rights were under the Lease. (Cockerell v. Title Ins. & Trust Co. (1954) 42 Cal.2d 284, 292 [“The burden of proving an assignment falls upon the party asserting rights thereunder.”].)
Since Plaintiff has failed to plead sufficient fact to show that the assignment to the deed was valid, the Demurrer to the FAC for lack of standing is SUSTAINED WITH LEAVE TO AMEND.
1st COA Breach of K
“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 claim also fails because Plaintiff cannot prove a contract with Defendant, Plaintiff has not alleged sufficient performance, and Plaintiff cannot allege damages. “The plaintiff has the burden of showing that the facts pleaded are sufficient to establish every element of the cause of action and overcoming all of the legal grounds on which the trial court sustained the demurrer, and if the defendant negates any essential element, we will affirm the order sustaining the demurrer as to the cause of action.” (Martin v. Bridgeport Community Assn., Inc. (2009) 173 Cal.App.4th 1024, 1031.)
Since, the Demurrer was sustained for lack of standing due to failure to plead a valid assignment of the Lease occurred, the Court finds that Plaintiff cannot prove a contract. Secondly, Defendant is correct that Plaintiff has not sufficiently pled performance. “First, where the condition is an event, as distinguished from an act to be performed by the plaintiff, a specific allegation of the happening of the condition is a necessary part of pleading the defendant's breach.”
“Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1389.”
Here, for the assignment to be valid, Franchisor or Tenant were required to obtain the Landlord’s consent. Nowhere in the FAC does Plaintiff allege that these conditions were met. The Landlord’s consent was a condition precedent for the assignment of the Lease to be valid, and Plaintiff has failed to plead that this condition was met. Where “events which had to exist or occur” prior to the Landlord’s performance being due, alleging “simply acts to be performed by plaintiffs, such general allegations are not adequate.” (Careau & Co., supra, 222 Cal.App.3d at 1390.)
Plaintiff’s general allegation that Plaintiff “performed all conditions, covenants and services required to be performed by PLAINTIFF pursuant to the Lease, except for those that were excused. All conditions precedent to the filing of this action have been met, waived, and / or excused” is a legal conclusion unsupported by any facta. (FAC ¶ 29.) “For example, where plaintiff alleges a permissible conclusion of law such as the due performance of a condition precedent but also avers specific additional facts which either do not support such conclusion, or are inconsistent therewith, such specific allegations will control ‘and a complaint which might have been sufficient with general allegations alone may be rendered defective....’ (Citations.)” (Careau & Co., supra, 222 Cal.App.3d at 1390.)
Plaintiff failed to plead that the conditions precedent for the assignment of the Lease, such as obtaining Defendant’s consent, occurred or that Defendant’s consent was not a condition precedent or facts to show that Plaintiff’s failure to obtain consent was excused. Moreover, even if Plaintiff’s performance was excused, Plaintiff fails to plead that Franchisor’s/Mr. Franchise Inc.’s and Tenant’s/PMFB’s obligations to obtain Defendant’s consent of the assignment of the Lease were also excused.
Accordingly, the second element for a breach of contract claim has not been met.
Defendant asserts that Sections 2.02 and 2.03 of the Lease limit a Tenant’s remedies and Plaintiff is seeking additional damages such as out-of-pocket expenses, loss of use, lost profits and consequential damages that are not permitted by the Lease. Section 2.03 states: “The Provisions of Section 2.03 shall provide Tenant’s sole and exclusive remedy for any delay in the occurrence of the Possession Date.” (FAC Ex. A.) Since Defendant fails to point to a provision that limits a Tenant’s remedies for breach of the Lease, Plaintiff may properly seek consequential damages.
“[W]here the nature of the plaintiff's claim is clear, and under substantive law no liability exists, a court should deny leave to amend because no amendment could change the result.” (Hoffman v. Smithwoods RV Park, LLC (2009) 179 Cal.App.4th 390, 401.)
The Demurrer to the first cause of action is SUSTAINED WITH LEAVE TO AMEND because Plaintiff may still plead facts that show that the assignment of the Lease was valid.
2nd, 3rd, & 4th COA: Frauded-Based Causes of Action
Defendant demurrers to the second cause of action for Promise Made Without Intent to Perform, the third cause of action for Negligent Misrepresentation, and the fourth cause of action for Fraudulent Concealment on the based these causes of action are not pled with the requisite 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.) “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.)
“‘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.” (Boschma 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 alleges that on or about June 05, 2020, Plaintiff’s Chief Executive Office, Mike Rafippor, reached out to various agents of Defendant including Lance Taylor and Michael de Leon. (FAC ¶ 25.) Plaintiff does not state what representations were made or what the omissions were. Plaintiff’s agent reached out again to Jeff Plauche and Jack Marshal on August 10, 2020, but again fails to state what representations or omissions occurred and by what means they were made. (FAC ¶ 25, 41.)
“PLAINTIFF notified various agents of DEFENDANTS, including but not limited to Lance Taylor and Michael de Leon and then to Jeff Plauche and Jack Marshall of this issue and the aforementioned agents of DEFENDANT continuously represented to PLAINTIFF DEFENDANT would be able to obtain all the necessary permits to convert the Premises to a restaurant as well as the ability to have an enclosed patio for outdoor dining.” (FAC ¶ 38.) Plaintiff does not state when these conversations took place and if they are the ones that occurred on August 10, 2020.
Plaintiff also alleges that “PLAINTIFF was advised by DEFENDANTS’ own agent who was charged with obtaining permits for the DEFENDANTS work, so that the premises can be made to comply with the delivery requirements of the Lease, that no permits are in sight.” (FAC ¶ 20.) Plaintiff fails to state that Defendant’s agents informed Plaintiff that no permits.
Moreover, without alleging that the Assignment was valid, Plaintiff fails to plead that Defendant was under an obligation to disclose facts to Plaintiff. (FAC ¶ 37.)
Lastly, if the alleged assignment of the Lease occurred in December of 2019, Plaintiff cannot plead that it relied on Defendant’s misrepresentation or omissions in accepting the Lease, if the alleged misrepresentations occurred after the assignment. (FAC ¶¶ 40, 42, Ex. B.) To the extent that Plaintiff alleges it relied on the representations made regarding the Lease, Plaintiff does not explain how its fraud causes of action are separate from the Lease and its damages are not barred by the Economic Loss Rule. (FAC ¶¶ 42-44.)
For the reasons stated the Demurrer to the second, third, and fourth causes of action is SUSTAINED WITH LEAVE TO AMEND.
5th COA: Breach of Good Faith and Fair Dealing
“Every contract contains an implied covenant of good faith and fair dealing providing that no party to the contract will do anything that would deprive another party of the benefits of the contract.¿The implied covenant protects the reasonable expectations of the contracting parties based on their mutual promises.” (Digerati Holdings, LLC v. Young Money Entertainment, LLC (2011) 194 Cal.App.4th 873, 885.) “The covenant thus cannot ‘be endowed with an existence independent of its contractual underpinnings.’ (Citation).” (Guz v. Bechtel Nat. Inc. (2000) 24 Cal.4th 317, 349.)
Since Plaintiff’s Breach of Contract cause of action fails, so does Plaintiff’s fifth cause of action.
The demurrer is SUSTAINED WITH LEAVE TO AMEND the fifth cause of action.
At the hearing on the Motion, Defendant argued that Plaintiff had not opposed the demurrer as to the fifth cause of action and it should be sustained without leave. Defendant is correct, however this cause of action was sustained with leave because leave to amend was granted to the first cause of action for breach of contract. If Plaintiff's break of contract claims survives, so too would the fifth cause of action.
6th and 7th COA: 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.)
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.)
Since Plaintiff’s fraud-based causes of action fail, Plaintiff cannot show that the interference with its prospective economic advantage arose from an independent wrong. Moreover, breach of contract is not wrongful conduct that is independent of a tort claim for interference. “[A]s our Supreme Court has said time and again, an actor’s breach of contract, without more, is not ‘wrongful conduct’ capable of supporting a tort (Citations), including the tort of intentional interference with a prospective economic advantage.” (Drink Tank Ventures LLC v. Real Soda in Real Bottles, Ltd. (2021) 71 Cal.App.5th 528, 533.”
For the reasons stated, the demurrer to the sixth and seventh causes of actions is SUSTAINED WITH LEAVE TO AMEND.
At the hearing on the Motion, Defendant argued that Plaintiff had not opposed the demurrer as to the sixth and seventh causes of action and these should be sustained without leave. Defendant is correct , however, if Plaintiff's fraud cause of action survives demurrer, Plaintiff may be able to allege an independent wrong sufficient to sustain the sixth and seventh claims.
II. Motion to Strike
Defendant moves to strike the following from Plaintiff’s FAC:
· Paragraph 33, subparagraphs b-e, in their entirety;
· Paragraph 46, subparagraphs b-e, in their entirety;
· Paragraph 64, in its entirety;
· Prayer, paragraphs 2, 3, 4, and 6 in their entirety.
Therefore, the Motion to Strike is GRANTED WITH LEAVE TO AMEND. At the hearing on the Motion, Defendant argued that the Motion to Strike should be granted without leave. For the same reasons stated above in connection with the fifth, sixth and seventh causes of action, leave to amend will be granted.
Conclusion
Defendant’s demurrer is SUSTAINED WITH 30 DAYS LEAVE TO AMEND.
Defendant’s Motion to Strike is GRANTED WITH 30 DAYS LEAVE TO AMEND.
Moving party to give notice.