Case Number: KC069073 Hearing Date: March 26, 2018 Dept: O

7447 Firestone, LLC v. Sheng Ma, LLC (KC069073)

Defendants Sheng Ma, LLC, Zhou, and Li’s DEMURRER TO THIRD AMENDED COMPLAINT and MOTION TO STRIKE

Respondent: Plaintiff 7447 Firestone, LLC

TENTATIVE RULING

Defendants Sheng Ma, LLC, Zhou, and Li’s demurrer to third amended complaint is SUSTAINED. Motion to strike is GRANTED. The plaintiff may address additional facts known to it to support the allegations.

Defendant Sheng Ma, LLC (“Sheng Ma”) demurs to the 2nd, 3rd, and 5th causes of action on the ground that they fail to state facts sufficient to constitute a cause of action.

2nd – 3rd CAUSES OF ACTION

VIOLATION OF CC 1102:

CC 1102 et.seq. requires a seller of real property to disclose known material defects that would impact the price of the real property to the buyer. When the seller’s real estate agent or broker is aware of facts materially affecting the value or desirability of the property which are known or accessible only to him, he or she is under a duty to disclose them to the buyer. (Holmes v. Summer (2010) 188 Cal.App.4th 1510.)

BUSINESS PRACTICES: B&P CODE 17200:

The Unfair Business Practices Act shall include “any unlawful, unfair or fraudulent business act or practice.” (B&P Code 17200.) A plaintiff alleging unfair business practices under these statutes must state with reasonable particularity the facts supporting the statutory elements of the violation. (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 619.) Even a single incident – a one-time act that is unfair, unlawful or fraudulent – is sufficient to state a claim under 17200. (Klein v. Earth Elements, Inc. (1997) 59 Cal.App.4th 965, 969 fn. 3.)

Par. 17 alleges that Plaintiff and Seller entered into a written agreement on 9/7/16 in which Plaintiff agreed to purchase and Seller agreed to sell the Subject Property, and Plaintiff made a $100,000.00 deposit into escrow. Addendum No. 1, Par. 2 of the Agreement provides, “Buyer represents and warrants that it will complete all due diligence within the review period as required to satisfy itself concerning the condition of the property including, but not limited to, an investigation to determine the existence of any material defects, development conditions/restrictions and hazardous materials. Buyer is purchasing the property “as is” in its current condition.” (TAC, Ex. A.) Page 2 of the Addendum states, “Buyer acknowledges that it relies solely upon its own investigation, inspection and due diligence in electing to proceed and close escrow with full knowledge of facts set forth in this Declaration. In no event shall Seller or Buyer be liable to each other for any consequential, special or punitive damages for any claim arising out of this Purchase Agreement.”

Par. 18 alleges on 11/7/2016, before the close of escrow, Plaintiff agreed to release the Escrow Deposit directly to the seller in exchange for Seller’s agreement to extend the closing date to February 2, 2017. The funds were released on 12/5/2016.

“Thereafter Plaintiff discovered that the air conditioning unit and electrical paneling of the subject property, among other things, had been vandalized.” (TAC, Par. 19; TAC, Ex. B.) However, the complaint is silent about when Plaintiff made this discovery. Was it before or after the disclosure made by Defendant in Par. 20?

Par. 20 alleges that on 1/9/17, Seller disclosed “for the first time” that the property had a problem with “continued vandalism.” Plaintiff further alleges that Defendants had not disclosed this information at any time prior, and had Plaintiff known of this problem, it would not have released the Escrow Deposit. (TAC, Pars. 20-21.) However, there no facts alleged as to when the vandalism occurred, when Defendant was made aware of the vandalism, if it existed at a time prior to the disclosure, or if Defendant knew of it when the agreement was signed.

Delivery of a real estate transfer disclosure statement of known defects may not be waived in an “as is” sale. (Loughrin v. Superior Court (1993) 15 Cal. App. 4th 1188.) Plaintiff admits that it entered into an “as is” transaction and Pars. 20-21 allege that Defendants did not disclose any vandalism problem until 1/9/17. However, as noted above, it is nowhere alleged that Defendants had any knowledge of the vandalism or that it existed prior to the time it was actually disclosed on 1/9/17, or importantly, such was known to the Defendant at the time the parties entered into this transaction.

There is no duty to disclose defects unknown to the seller. Further, “[A]n ‘as is’ provision in any sale puts potential buyers on notice that the seller makes no warranty about the quality or condition of the thing sold. In practice it serves as a kind of ‘red flag’ warning the buyer that the goods or property to be sold may not be in perfect condition or of ideal quality.” [Shapiro v. Hu (1986) 188 CA3d 324, 333, 233 CR 470, 475; see also Loughrin v. Super.Ct. (Barr) (1993) 15 CA4th 1188, 1195, 19 CR2d 161, 164—“as is” sale simply means buyer “accepts the property in the condition visible or observable by him”] The allegations are insufficient to show liablilty by Defendant

Demurrer is SUSTAINED.

5th CAUSE OF ACTION

FRAUD:

The elements are: 1) misrepresentation (false representation, concealment, or nondisclosure); 2) knowledge of falsity (scienter); 3) intent to defraud or induce reliance; 4) justifiable reliance; and 5) damages. (See CC 1709.) Fraud actions are subject to strict requirements of particularity in pleading. (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal. 3d 197, 216.) A plaintiff must allege what was said, by whom, in what manner (i.e. oral or in writing), when, and, in the case of a corporate defendant, under what authority to bind the corporation. (See Goldrich v. Natural Y Surgical Specialties, Inc. (1994) 25 Cal.App.4th 772, 782.)

Pars. 44-46 allege that Defendants failed to disclose that the property had a problem with vandalism at the time of entry into the Agreement of release of the Escrow deposit. However, there is no allegation that the vandalism existed at the time of the entry into the agreement, or that Defendant was aware of such until the later disclosure. Demurrer is SUSTAINED.

Motion to strike punitive damages is GRANTED.