Case Name: Lawrence B. Hooper, MD, Inc., et al. v. Inna Yaskin, Inc., doing business as Elite Medical Center, Inc.
Case No.: 16-CV-293794

Demurrer by Plaintiffs and Cross-Defendants Lawrence B. Hooper, MD, Inc. and Hooper Clinic, P.C. to the Cross-Complaint of Defendant and Cross-Complainant Inna Yaskin, Inc., Doing Business as Elite Medical Center, Inc.

Factual and Procedural Background

This is an action for breach of contract. According to the allegations of the underlying complaint, plaintiffs and cross-defendants Lawrence B. Hooper, MD, Inc. and Hooper Clinic, P.C. (collectively, “Plaintiffs”) entered into a written contract with defendant and cross-complainant Inna Yaskin, Inc., doing business as Elite Medical Center, Inc. (“Defendant”), providing that Plaintiffs would sell Defendant their medical business for $150,000, “certain assets” for $7,050, and a “Coherent/Lightsheer Lazer” for $10,000. (Complaint, ¶¶ 14-17.) Plaintiffs filed the complaint on April 12, 2016, alleging that Defendant failed to pay them all of the monies due to them under the terms of the contract and asserting claims for (1) breach of contract and (2) common count. (Id., at ¶¶ 18-25.)

On May 27, 2016, Defendant filed the cross-complaint against Plaintiffs, asserting causes of action for (1) breach of contract and (2) fraud. Defendant alleges that “[t]he parties entered into a written contract for sale of the medical business of Lawrence B. Hooper, M.D., Inc. and related equipment and a medical weight loss clinic”; Plaintiffs “misrepresented the status of the business, in particular representing that [they] owned certain equipment, that the equipment was in good condition, that the medical weight loss business was viable and had a stream of business and that the business had a reasonable reputation in the community”; those representation were false “as the business did not own much of its equipment, the weight loss clinic business was unsustainable and based on prescriptions that could not be continued and had no stream of new patients and Dr. Hooper’s reputation in the community was so bad that the [Plaintiffs’] business had negative goodwill value”; and Defendant “purchased the business and has suffered severe financial losses as a result of [Plaintiffs’] misrepresentations and breaches of contract.” (Cross-Complaint, ¶¶ 1-4.)

On July 7, 2016, Plaintiffs filed the instant demurrer to the cross-complaint. Defendant filed papers in opposition to the demurrer on July 8, 2016. On July 12, 2016, Plaintiffs filed a reply.

Discussion

Plaintiffs demur to the cross-complaint in its entirety on the ground of lack of legal capacity. (See Code Civ. Proc., § 430.10, subd. (b).) Plaintiffs also demur to the first and second causes of action on the ground of failure to allege sufficient facts to state a claim. (See Code Civ. Proc., § 430.10, subd. (e).) Lastly, they demur to the first cause of action alone on the ground of uncertainty. (See Code Civ. Proc., § 430.10, subd. (f).)

I. Meet and Confer

As an initial procedural matter, Defendant asks the Court to summarily overrule Plaintiffs’ demurrer because Plaintiffs failed to comply with the meet and confer procedures set forth in Code of Civil Procedure section 430.41 (effective January 1, 2016).

That statute requires a demurring party to meet and confer with the party who filed the challenged pleading to seek informal resolution of the demurring party’s objections. (Code Civ. Proc., § 430.41, subd. (a).) The meet and confer must be conducted in person or by telephone, must address each cause of action to be included in the demurrer, and must involve the provision of legal support for the positions taken by the demurring party. (Code Civ. Proc., § 430.41, subd. (a)(1).) The demurring party must also file and serve with the demurrer a declaration regarding the meet and confer process. (Code Civ. Proc., § 430.41, subd. (a)(3).)

Here, Plaintiffs concede that they failed to meet and confer as required by the statute. Nonetheless, as Plaintiffs point out, a determination that meet and confer efforts were insufficient is not grounds to overrule a demurrer. (Code Civ. Proc., § 430.41, subd. (a)(4).) In the interest of addressing the issues raised by the demurrer and moving the case forward, the Court will overlook—in this instance only—Plaintiffs’ failure to meet and confer. Plaintiffs are admonished to remain apprised of, and to comply with, newly applicable law going forward.

II. Legal Standard

In reviewing the sufficiency of a complaint against a general demurrer, courts are guided by long settled rules. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) “ ‘The reviewing court gives the complaint a reasonable interpretation, and treats the demurrer as admitting all material facts properly pleaded. [Citations.] The court does not, however, assume the truth of contentions, deductions or conclusions of law. [Citation.]’ ”
(Gregory v. Albertson’s, Inc. (2002) 104 Cal.App.4th 845, 850.) The question of the plaintiff’s ability to prove the factual allegations of the complaint, or the possible difficulty in making such proof, does not concern the reviewing court. (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 213–214.)

III. Lack of Legal Capacity

Plaintiffs argue that Defendant lacks legal capacity to maintain the cross-complaint because it does not plead any facts demonstrating compliance with “the fictitious business name statutes, specifically those regarding “the filing and publishing” of a fictitious business name. (Ps’ Mem. Ps. & As., pp. 2-3.) Plaintiffs cite the case of Pleaters’ & Stitchers’ Ass’n v. Davis (1934) 140 Cal.App. 403 for the proposition that “[a] demurrer for lack of legal capacity to sue will be sustained when the pleading shows on its face that suit is being brought on, or on account of, a contract made, or transaction had, in the fictitious business name but is silent as to whether or not the plaintiff or cross-complainant has complied with the filing and publication requirements of the fictitious business name statutes.” (Ps’ Mem. Ps. & As., p. 2.)

Business and Professions Code section 17918 states that “[n]o person transacting business under a fictitious business name . . . may maintain any action upon or on account of any contract made . . . in the fictitious business name in any court of this state until the fictitious business name statement [required by Business and Professions Code section 17910] has been executed, filed, and published.” (Bus. & Prof. Code, § 17918; see Hydrotech Systems, Ltd. v. Oasis Waterpark (1991) 52 Cal.3d 988, fn. 8; see also American Alt. Energy Partners II, 1985 v. Windridge, Inc. (“American”) (1996) 42 Cal.App.4th 551, 562.) By the express terms that statute, compliance with the fictitious business name statute is necessary only to maintain a cause of action founded upon a contract, and not to maintain a tort cause of action. (American, supra, 42 Cal.App.4th at p. 562.)

Here, Defendant’s second cause of action for fraud sounds in tort. Thus, while a demurrer directed specifically at the first cause of action for breach of contract on the ground of lack of legal capacity might be in order, a demurrer to the entire cross-complaint premised on Defendant’s failure to allege or demonstrate compliance with the fictitious business name statute is improper. (See Jones v. Iverson (1900) 131 Cal. 101, 104 [stating that “a general demurrer directed to the whole of the complaint should be overruled, if some portion of the complaint states a cause of action”]; see also Lord v. Garland (1946) 27 Cal.2d 840, 850 [“[A] demurrer which attacks an entire pleading should be overruled if one of the counts therein is not vulnerable to the objection.”]; Shook v. Pearson (1950) 99 Cal.App.2d 348, 351.)

As such, the demurrer on the ground of lack of legal capacity is OVERRULED.

IV. Uncertainty

Plaintiffs argue that the first cause of action for breach of contract is uncertain because Defendant does not allege the terms of the written contract, attach a copy of the contract to the cross-complaint, allege the date of the contract or the date on which it was breached, allege any facts supporting the conclusion that its performance is excused, or allege how and when the contract was breached. (See Ps’ Mem. Ps. & As., pp. 3-4.)

Plaintiffs’ contentions demonstrate a misunderstanding on their part regarding the meaning of “uncertainty” in the demurrer context. A demurrer for uncertainty is disfavored, and will be sustained only where the allegations of the pleading are so unintelligible that the defendant cannot reasonably respond to them. (See Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 616 [stating that “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”].) The allegations of the first cause of action can hardly be characterized as unintelligible for the purposes of the demurrer as they adequately apprise Plaintiffs of the nature of the claim against them, i.e., that they allegedly breached their contract with Defendant for sale of the subject business and various assets. Consequently, there is no basis to sustain Plaintiffs’ demurrer to the first cause of action on this ground.

Accordingly, the demurrer on the ground of uncertainty is OVERRULED.

V. Failure to Allege Facts Sufficient to State a Cause of Action

A. First Cause of Action

Plaintiffs argue that Defendant fails to allege sufficient facts to support its first cause of action for breach of contract because Defendant does not allege the terms of the written contract; there are no allegations showing that the contract contained terms regarding the goodwill of the business, the ownership of all business equipment, or a stream of patients and income; and Defendant does not allege how and when the contract was breached or that a demand for performance has been made. (See Ps’ Mem. Ps. & As., pp. 4-5.)

“A cause of action for breach of contract requires pleading of a contract, plaintiff’s performance or excuse for failure to perform, defendant’s breach and damage to plaintiff resulting therefrom. [Citation.] A written contract may be pleaded either by its terms—set out verbatim in the complaint or a copy of the contract attached to the complaint and incorporated therein by reference—or by its legal effect. [Citation.] In order to plead a contract by its legal effect, plaintiff must ‘allege the substance of its relevant terms. This is more difficult, for it requires a careful analysis of the instrument, comprehensiveness in statement, and avoidance of legal conclusions.’ ” (McKell v. Washington Mut., Inc. (2006) 142 Cal.App.4th 1457, 1489; see Heritage Pacific Financial, LLC v. Monroy (2013) 215 Cal.App.4th 972, 993.)

Here, Defendant alleges that “[t]he parties entered into a written contract for sale of the medical business of Lawrence B. Hooper, M.D., Inc. and related equipment and a medical weight loss clinic”; Plaintiffs made various representations regarding the business; those representations were false; the “business sold had a negative goodwill and did not own the equipment it was warranted to have owned nor did it have the stream of patients and income as represented”; Plaintiffs “breached the contract”; it “performed the contract except to the extent performance has been excused”; and it “has been damaged.” (Cross-Complaint, ¶¶ 1-4.) These allegations are insufficient to state a claim for breach of contract. While Defendant alleges that it entered into a contract with Plaintiffs for “sale of the medical business of Lawrence B. Hooper, M.D., Inc. and related equipment and a medical weight loss clinic” it fails to allege sufficient facts to show that Plaintiffs breached that contract. Notably, the conclusory allegation that the contract was breached is a conclusion of law that is not admitted as true on demurrer. (See Blank v. Kirwan (1985) 39 Cal.3d 311, 318 [“In reviewing the sufficiency of a complaint against a general demurer, we are guided by long settled rules. ‘We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law.’ ”].) There are no allegations that Plaintiffs failed to sell Defendant “the medical business of Lawrence B. Hooper, M.D., Inc.,” “related equipment,” or the “medical weight loss clinic.” Instead, Defendant merely alleges that Plaintiffs made various representations that induced her to enter into the contract and those representations were false. Additionally, Defendant fails to plead facts showing that the representations made by Plaintiffs and/or their conduct constituted a breach the terms of the contract itself.

Accordingly, the demurrer to the first cause of action on the ground of failure to allege facts sufficient to state a claim is SUSTAINED, with 10 days’ leave to amend.

B. Second Cause of Action

Plaintiffs argue that the second cause of action for fraud fails to allege sufficient facts to state a claim because the alleged misrepresentations are not pled with the requisite specificity.

“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. Super. Ct. (“Lazar”) (1996) 12 Cal.4th 631, 638; see also Philipson & Simon v. Gulsvig (2007) 154 Cal.App.4th 347, 363.) “Fraud actions are subject to strict requirements of particularity in pleading. … Accordingly, the rule is everywhere followed that fraud must be specifically pleaded.” (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216.) “The pleading should be sufficient to enable the court to determine whether, on the facts pleaded, there is any foundation, prima facie at least, for the charge of fraud.” (Commonwealth Mortgage Assurance Co. v. Super. Ct. (1989) 211 Cal.App.3d 508, 518.) “[T]his particularity requirement necessitates pleading facts which ‘show how, when, where, to whom, and by what means the representations were tendered.’” (Lazar, supra, 12 Cal.4th at p. 645.)

As indicated above, Defendant alleges that Plaintiffs “misrepresented the status of the business, in particular representing that [they] owned certain equipment, that the equipment was in good condition, that the medical weight loss business was viable and had a stream of business and that the business had a reasonable reputation in the community.” (Cross-Complaint, ¶ 2-3.) These allegations do not meet the particularity requirement as Defendant does not indicate how, when, where, and by what means the misrepresentations were tendered.

Accordingly, the demurrer to the second cause of action on the ground of failure to allege facts sufficient to state a claim is SUSTAINED, with 10 days’ leave to amend.