Judge: Yolanda Orozco, Case: 22STCV10067, Date: 2023-04-24 Tentative Ruling

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Case Number: 22STCV10067    Hearing Date: April 24, 2023    Dept: 31

PROCEEDINGS:     DEMURRER TO FAC WITHOUT MOTION TO STRIKE

MOVING PARTY:   Defendants 1978, LLC and David Bilfeld

RESP.  PARTY:        Plaintiff Cathy Arkley

DEMURRER TO FAC WITHOUT MOTION TO STRIKE

TENTATIVE RULING

Defendants’ demurrer is OVERRULED as to Plaintiff’s fourth cause of action for fraud.

Background

On March 23, 2022, Plaintiff Cathy Arkley filed a Complaint against 1978, LLC and David Bilfeld (collectively “Defendants”) and Does 1 to 10.

The operative First Amended Complaint (FAC) asserts causes of action for:

1)      Violations of Building Standards as outlined in Cal. Civ. Code § 896

2)      Breach of Contract

3)      Breach of Express and Implied Warranty

4)      Fraud

5)      Strict Liability

On October 07, 2022, Defendants’ demurrer to Plaintiff’s fourth cause of action for fraud was SUSTAINED with leave to amend.

On November 28, 2022, Defendants filed a demurrer to Plaintiff’s fourth cause of action.

Plaintiff filed opposing papers on April 11, 2023.

Defendants filed a reply on April 17, 2023.

meet and confer

Before filing a demurrer, the demurring party is required to meet and confer with the party who filed the pleading demurred to, in person or telephonically, to determine whether an agreement can be reached through a filing of an amended pleading that would resolve the objections to be raised in the demurrer. (Code Civ. Proc. (CCP) § 430.41.)

The meet and confer requirement has been met. (Thattam Decl. ¶¶ 2-4, Ex. 1.)

Legal Standard

Where pleadings are defective, a party may raise the defect by way of a demurrer.¿ (Coyne v. Krempels (1950) 36 Cal.2d 257, 262.) A demurrer tests the sufficiency of a pleading, and the grounds for a demurrer must appear on the face of the pleading or from judicially noticeable matters.¿ (Code Civ. Proc., § 430.30(a); Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) In evaluating a demurrer, the court accepts the complainant’s properly-pled facts as true, and ignores contentions, deductions, and conclusory statements. (Daar v. Yellow Cab Co. (1976) 67 Cal.2d 695, 713; Serrano v. Priest (1971) 5 Cal.3d 584, 591.) Moreover, the court does not consider whether a plaintiff will be able to prove the allegations, or the possible difficulty in making such proof. (Fisher v. San Pedro Peninsula Hospital (1989) 214 Cal.App.3d 590, 604.) 

Leave to amend must be allowed where there is a reasonable possibility of successful amendment. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.)¿ The burden is on the complainant to show the Court that a pleading can be amended successfully. (Id.)¿¿¿ 

Judicial Notice & Evidentiary Objections

The court may take judicial notice of “[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, subd. (h).) “Taking judicial notice of a document is not the same as accepting the truth of its contents or accepting a particular interpretation of its meaning.” (Joslin v. H.A.S. Ins. Brokerage (1986) 184 Cal.App.3d 369, 374.)

Defendants request Judicial Notice of the following:

1)      Attached is a true and correct copy of the 2018 MLS LISTING FOR 462 N. CROFT AVENUE, LOS ANGELES, CA 90048 (Exhibit 1). The original listing is offered for the probative value of showing the falsehood of Plaintiff’s square footage allegations in her First Amended Complaint

Defendants have failed to show that the 2018 MLS Listing can be judicially noticed because it is capable of immediate and accurate determination from sources of reasonably indisputable accuracy. (Evid. Code § 452, subd. (h).) 

Therefore, Defendant’s request for judicial notice is DENIED.

Discussion

Allegations in FAC

The Defendants were the owner-builder of the subject property located in Los Angeles, California. (FAC ¶ 3.) Plaintiff purchased the property under a Residential Purchase Agreement dated June 29, 2018. (FAC ¶¶ 1, 6,7.) The FAC alleges that the subject property was sold with various deficiencies and violations of building standards manifested themselves in the form of property damage. (FAC ¶¶ 9, 10.)

The FAC alleges that “[t]hese various problems became apparent shortly after Plaintiff moved into the home, and after significant rainfall occurred or water was used around the defective areas.” (FAC ¶ 11.) Plaintiff gave Defendants timely notice of the defective conditions and the faulty construction, giving Defendants a reasonable opportunity for investigation and repair, which Defendants failed to correct (FAC ¶¶ 12, 13.)

Secondly, Defendant made various misrepresentations about the home to Plaintiff. (FAC ¶ 15.)  An inspection prior to closing revealed various defect Defendants promised but failed to repair. (FAC ¶ 15.) When Plaintiff began to discover the defects, Defendants routinely misled her about the nature of the problems.

Roof and Water Damage

For example, Plaintiff noticed the discoloration in the tiles on the rooftop terrace and bathroom after moving in, but Defendant Bilfeld told Plaintiff the discoloration was a chemical reaction that could be treated with a solution. (FAC ¶ 15.) Plaintiff later determined the discoloration was due to Defendant Bilfeld failing to waterproof around the roof and construct proper drainage. (FAC ¶ 15.) About one month after Plaintiff moved into the home, Plaintiff texted Defendant Bilfeld about the water damage and the ceiling crack and discoloration. (FAC ¶ 26.) Defendants sent a roofer to Plaintiff’s home to fix the problem. (FAC ¶ 27.)

On January 14, 2019, Plaintiff again texted Defendant Bilfeld about a leak “in a brand new 3 ft long crack.” (FAC ¶ 26.) Plaintiff stated “[i]f you have insurance the best thing is to get the whole roof redone. It’s obviously shoddy workmanship.” (FAC ¶ 29.) Defendant responded, “roofers’ insurance will cover it.” (FAC ¶ 30.) Plaintiff asserts that Defendants had no reasonable basis to represent that any “roofers” insurance policy would cover the damage to the room and that Defendants made assurances to delay Plaintiff from acting swiftly to protect her interests. (FAC ¶ 30.)

“On or about January 30, 2019, a rainstorm occurred. Before the rain came, Plaintiff notified Mr. Bilfeld by text that she needed his help because ‘we have a catastrophe coming tomorrow.’” (FAC ¶ 32.) Defendant Bilfeld responded by stating “we just stared the insurance claim process.” (FAC ¶ 33.) On March 26, 2019, Plaintiff discovered there was no insurance policy to cover the vast damage to the roof. (FAC ¶ 34.). Plaintiff informed Defendant Bilfeld of the issue, who did not have a direct response but “continued to feign his willingness and ability to guarantee the workmanship at the home – and to make false excuses for not having done so yet – for the purpose of delaying Plaintiff from taking action (as alleged herein).” (FAC ¶ 35.)

On or about April 17, 2019, Defendant Bilfeld stated via text message that “regardless of what subcontractor is at fault ultimately I’ll make sure you are taken care of.” (FAC ¶ 36.) Plaintiff understood this to mean that Defendants were guaranteeing the workmanship on the home so that Plaintiff would not rescind the purchase of the home or take legal action. (FAC ¶ 36.)

On April 25, 2019, Defendant Bilfeld represented that Defendants were waiting on engineering reports to be produced before he could attend to repairs. (FAC ¶ 37.) Defendant Bilfeld stated by text:

“If I knew exactly what it was. It could have been taken care of: I’ve been waiting on an engineering reports. No one thus far even know what could Be Causing it specifically. Could it be a Stucco problem?”

(FAC ¶ 37.)

“On or about April 26, 2019, Defendants represented in a written letter through an attorney that they were willing to make the necessary repairs but needed time to conduct their own inspections. Again, this was simply a ruse created by Defendants to delay Plaintiff from taking immediate action.” (FAC ¶ 38.) “Around October 2019, after no further progress had been made by Defendants towards repairing the home in a professional manner, Plaintiff decided that she could no longer rely on Defendants and took responsibility for the repairs herself.” (FAC ¶ 39.)

False Advertising of Square Footage

Secondly, Defendants induced Plaintiff to buy the subject property by misstating the home’s square footage on the MLS listing and in advertising materials. (FAC ¶¶ 17, 18, 19.) Plaintiff did not reasonably discover the correct square footage until over two years later when she sold the home for a lesser amount than what she purchased it for. (FAC ¶ 17.) Defendants’ real estate broker also verbally confirmed that the square footage of the subject property was around 4,500 square feet when the actual square footage was no more than 3,715 square feet. (FAC ¶¶ 18, 19, 20.)

Demurrer to 4th COA: Fraud

“The elements of fraud, which give rise to the tort action for deceit, are (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or 'scienter'); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.) “In California, fraud must be pled specifically; general and conclusory allegations do not suffice.” (Id. at 645.)

Defendants’ demurrer to Plaintiff’s 4th cause of action for fraud on the basis that the cause of action is barred by the three-year statute of limitations, fails to plead facts with the requisite specificity, and is uncertain, ambiguous, or unintelligible.

On October 07, 2022, Defendants’ demurrer to the fourth cause of action was SUSTAINED WITH LEAVE TO AMEND because Plaintiff failed to plead sufficient facts to show when the alleged misrepresentations were made, how they were made, or Plaintiff’s reliance. Now, in her opposing papers, Plaintiff states that she set forth two distinct fact patterns involving misrepresentation: (1) the misrepresentation of the square footage of the home; and (2) false promises to repair or to otherwise fix or rectify damages after the building defects came to the surface. (Opp at 2.)

Statute of Limitations

Defendants assert Plaintiff’s cause of action for fraud is barred by the three-year statute of limitations. (See Code Civ. Proc., § 338(d).) Defendants assert that at the time of purchase, June 29, 2018, or soon thereafter, Plaintiff had either actual notice or inquiry notice about the construction defects. (See Kline v. Turner (2001) 87 Cal.App.4th 1369, 1373 [“The statute of limitations begins to run when the plaintiff has information which would put a reasonable person on inquiry.”) Defendants also argue that per State of California ex rel. Metz v. CCC Information Services, Inc. (2007) 149 Cal.App.4th 402 (“Metz”), since all of Defendants’ alleged fraudulent statements arouse from a single transaction—the purchase and sale of the subject property—the Court should hold that the continuing accrual rule does not apply and Plaintiff’s fraud claims are barred.

In Metz, a third-party company, CCC Information Services (“CCC”), made false statements to the plaintiff’s (Metz) insurer regarding prices for comparable used vehicles that resulted in Metz’s insurer reducing the valuation of plaintiff’s totaled car in October of 1999. (Metz, supra, 149 Cal.App.4th at 409.) Metz sued his insurance provider in a separate action and filed a complaint against CCC on April 20, 2004. (Id. at 408.) The trial court sustained CCC’s demurrer to the first amended complaint without leave to amend finding that Metz’s action was barred by the three-year statute of limitations. (Id. at 407.) Metz appealed and argued that the statute of limitations did not being to run until he had actual notice of every alleged fact in his complaint. (Metz, supra, 149 Cal.App.4th at 415.) The Appeal Court rejected the argument and found that inquiry notice was sufficient for the three-year statute of limitations to begin to accrue that Metz action was barred. (Id. at 418.)  

As to the application of the doctrine of continuing accrual rule, the Appeal Court found it inapplicable to Metz’s claim because:

“Metz's action does not involve a recurring obligation or any such periodic payment obligations. Rather, every fraudulent statement or admission Metz alleges arose out of a single transaction—his insurance claim for the 1999 total loss of the Galant—which was resolved before the limitations period ran.”

(Metz, supra, 149 Cal.App.4th at 418 [italics original].) Under the doctrine of continuing accrual “[w]hen an obligation or liability arises on a recurring basis, a cause of action accrues each time a wrongful act occurs, triggering a new limitations period. [Citation.] The continuing accrual rule has been applied in a variety of actions involving the obligation to make periodic payments under California statutes or regulations.” (Id. at 418.)

The Court agrees that the doctrine of continuing accrual does not apply to this action because it does not involve an obligation to make periodic payments. However, merely because the doctrine of continuous accrual does not apply to this action, does not mean that Plaintiff’s fraud claim is barred.

In Aryeh v. Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185, the California Supreme Court explained the different doctrines that “may alter the rules governing either the initial accrual of a claim, the subsequent running of the limitations period, or both.” (Id. at 1192.) This includes the discovery rule “where applicable, ‘postpones accrual of a cause of action until the plaintiff discovers, or has reason to discover, the cause of action.’ (Citation).” (Id.) “Equitable tolling, in turn, may suspend or extend the statute of limitations when a plaintiff has reasonably and in good faith chosen to pursue one among several remedies and the statute of limitations' notice function has been served.” (Id.) “The doctrine of fraudulent concealment tolls the statute of limitations where a defendant, through deceptive conduct, has caused a claim to grow stale.” (Id.) “Finally, under the theory of continuous accrual, a series of wrongs or injuries may be viewed as each triggering its own limitations period, such that a suit for relief may be partially time-barred as to older events but timely as to those within the applicable limitations period.” (Id.)

The delayed discovery rule postpones the accrual of a cause of action until the plaintiff discovers or has reason to discover the cause of action. (Fox v. Ethicon Endo–Surgery, Inc. (2005) 35 Cal.4th 797, 807.) “[A] plaintiff invoking ‘the discovery rule must specifically plead facts to show (1) the time and manner of discovery and (2) the inability to have made earlier discovery despite reasonable diligence. The burden is on the plaintiff to show diligence, and conclusory allegations will not withstand demurrer.’ [Citations.]” (E-Fab, Inc. v. Accountants, Inc. Services (2007) 153 Cal.App.4th 1308, 1324 [italics original].)

The Court agrees that Plaintiff had notice that the subject property contained construction defects shortly after she moved in. However, Plaintiff’s fraud claim is not based on the representation that the subject property was free from defects, but on the fact that Defendants made assurances to Plaintiff that they would fix the defects at no cost to Plaintiff. Plaintiff also alleges fraud regarding misrepresentation of the square footage of her home.

Plaintiff states that as late as April 26, 2019, Defendants represent in a written letter that they were willing to make the necessary repairs but needed time to conduct their own inspection. (FAC ¶ 38.) It was not until October 2016, “after no further progress had been made by Defendants towards repairing the home in a professional manner” that Plaintiff decided she could not rely on Defendants and took responsibility for the repairs herself. (FAC ¶ 39.) The Court agrees that Defendants continued misrepresentations that it would make repairs delayed Plaintiff’s discovery because Plaintiff had yet to discover that  Defendants had no intention to make repairs, despite making statements to the contrary.

Plaintiff points out that in Shearer v. Cooper (1943) 21 Cal.2d 695, the California Supreme Court rejected the “contention that the plaintiff, having discovered the falsity of one representation, was put on guard as to all other representations and could not legally rely upon any statement made by the defendant.” (Id. at 703.) Plaintiff also properly notes that she can rely on the misrepresentations that that the construction defects would be fixed if the person making the representations had superior knowledge. (See Oakes v. McCarthy Co. (1968) 267 Cal.App.2d 231, 261.) Therefore, Plaintiff can apply the discovery rule to her fraud cause of action.

Moreover, Plaintiff has pleaded sufficient facts to apply the doctrine of fraudulent concealment. The doctrine of fraudulent concealment tolls the applicable statue of limitation when a defendant “by his own deception, has caused a claim to become stale and a plaintiff dilatory.” (Regents of University of California v. Superior Court (1999) 20 Cal.4th 509, 533.) Here, the FAC sufficiently states facts that Plaintiff could not have discovered that Defendants had no intention to make repairs due to Defendants’ continued assurances that repairs would be made.

As to the claim that Defendants did not misrepresent the square footage of the subject property because the 2018 MLS Advertisement Defendants’ provided contains no such misrepresentation; the issue is not subject to demurrer because it is a disputed issue of fact. "On a demurrer a court's function is limited to testing the legal sufficiency of the complaint. (Citation.) 'A demurrer is simply not the appropriate procedure for determining the truth of disputed facts.’ (Citation.)” (Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 113-114.) It remains disputed whether the 2018 MLS Advertisement, attached as Exhibit 1 to Defendants requests for judicial notice, is the same listing Plaintiff saw and relied on when she purchased the property. For this reason, the Court denied Defendants’ request for judicial notice.

Based on the foregoing, the Court OVERRULES Defendants’ demurrer on the basis that the fourth cause of action is barred by the three-year statute of limitations.

Failure to Plead Fraud with Specificity

Defendants maintain that Plaintiff’s fourth cause of action for fraud is not pled with the requisite specificity. The Court disagrees and finds that Plaintiff pled specific facts showing time and manner Defendant Bilfeld, as the sole manager and member of Defendant 1978 LLC, made representations that he would fix the defects noticed by Plaintiff. (FAC ¶¶ 27, 30, 33, 36, 37, 38.) Whether Defendants had the intention to follow through with the promises to make repairs remains a disputed fact not subject to demurrer.

As to the misrepresentation of the square footage of the subject property, Plaintiff stated that Defendants’ real estate broker verbally confirmed, per the written materials, that the square footage was around 4,500 square feet “around or slightly before June 2018.” (FAC 20.) Plaintiff also states that Defendants advertised material for the subject property that the square footage was 4,486 square feet. (FAC ¶ 18.)

Whether a misrepresentation was in fact made and whether Plaintiff reasonably relied on the alleged misrepresentations remains a disputed issue of fact. "Whether the plaintiff will be able to prove the pleaded facts is irrelevant to ruling upon the demurrer." (Stevens v. Superior Court (1986) 180 Cal.App.3d 605, 609–610.)

The demurrer based on lack of requisite specificity is OVERRULED.

Demurrer Based on Uncertainty

Under Code Civil Procedure § 430.10(f), a demurrer may also be sustained if a complaint is “uncertain.” Uncertainty exists where a complaint’s factual allegations are so confusing they do not sufficiently apprise a defendant of the issues it is being asked to meet. (Williams v. Beechnut Nutrition Corp. (1986) 185 Cal.App.3d 135, 139, fn. 2.) A demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures.” (Khoury v.Maly’sof California, Inc.(1993) 14 Cal.App.4th 612, 616.)

Here, Defendants fail to explain why the fourth cause of action is uncertain, ambiguous, or unintelligible. The Court had little trouble in ascertaining the essence of Plaintiff's claims from the matters alleged and cannot find that the FAC was so uncertain that Defendants cannot reasonably respond to it. Consequently, the demurrer for uncertainty is OVERRULED. 

The Demurrer is OVERRULED.

Conclusion

Defendants’ demurrer is OVERRULED as to Plaintiff’s fourth cause of action for fraud.

Moving party to give notice.