Case Number: BC683032 Hearing Date: May 30, 2018 Dept: 51

Background

Plaintiff Yun Shi sues Reeve Benaron and My Fat Greek, LLC for damages based on allegations that defendants failed to pay rent and sold commercial property to plaintiff at an inflated price.

On November 9, 2017, plaintiff filed a complaint for (1) breach of contract, (2) fraud (intentional misrepresentation), (3) constructive fraud, and (4) UCL violations.

On April 2, 2018, defendant Reeve Benaron filed this opposed demurrer against the complaint for insufficient facts and uncertainty. On April 2, 2018, defendant also filed this opposed motion to strike punitive damages from the complaint and monetary relief under the UCL cause of action. Defendant’s counsel submitted a compliant meet and confer declaration. Holmes Decl. ¶¶ 9-10. The Court considered the moving, opposition, and reply papers and rules as follows.

Demurrer Standard

A demurrer tests the sufficiency of the pleading at issue as a matter of law. City of Chula Vista v. County of San Diego (1994) 23 Cal.App.4th 1713, 1719. A demurrer may be sustained where the complaint fails to state facts sufficient to constitute a cause of action or the pleading is uncertain. CCP § 430.10(e), (f). The ultimate facts alleged in the complaint must be deemed true, as well as all facts that may be implied or inferred from those expressly alleged. Marshall v. Gibson, Dunn & Crutcher (1995) 37 Cal.App.4th 1397, 1403; see also Shields v. County of San Diego (1984) 155 Cal.App.3d 103, 133 (stating that “[o]n demurrer, pleadings are read liberally and allegations contained therein are assumed to be true.”) However, the Court does not assume the truth of allegations expressing conclusions of law or allegations contradicted by the exhibits to the complaint or by matters of which judicial notice may be taken. Vance v. Villa Park Mobilehome Estates (1995) 36 Cal.App.4th 698, 709.

Additionally, a special demurrer to a complaint may be brought on the ground the pleading is uncertain, ambiguous, or unintelligible. CCP § 430.10(f); Beresford Neighborhood Assn. v. City of San Mateo (1989) 207 Cal.App.3d 1180, 1191. A demurrer based on uncertainty is disfavored and will be strictly construed even when the pleading is uncertain in some respects. Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 616. A demurrer for uncertainty may be sustained when a defendant cannot reasonably determine to what he or she is required to respond. For example, when a plaintiff joins multiple causes of action as one, fails to properly identify each cause of action, or fails to state against which party each cause of action is asserted if there are multiple defendants, a complaint is uncertain. Williams v. Beechnut Nutrition Corp. (1986) 185 Cal.App.3d 135, 139, fn. 2.

If the demurrer is sustained, plaintiff “has the burden of proving the possibility of cure by amendment.” Czajkowski v. Haskell & White, LLP (2012) 208 Cal.App.4th 166, 173 (citing Grinzi v. San Diego Hospice Corp. (2004) 120 Cal.App.4th 72, 78-79.) Leave to amend must be allowed where there is a reasonable possibility of successfully stating a cause of action. Schulz v. Neovi Data Corp. (2007) 152 Cal.App.4th 86, 92.

Demurrer Analysis

First COA: Breach of Contract

Defendant contends that the complaint fails to state a cause of action for breach of contract because plaintiff does not allege he is a party to any pertinent agreement.

The complaint sets forth three agreements: (1) an October 7, 2012 lease agreement (Lease Agreement); (2) a November 10, 2012 guarantee of lease (Guarantee); and (3) a February 14, 2014 amendment to the Lease Agreement (Lease Amendment). Complaint ¶¶ 21, 23-24. Article 1 of the Lease Agreement indicates that the parties to the agreement are 26460 Ynez, LLC as landlord and My Fat Greek, LLC as tenant. Complaint, Exh. A (Lease Agreement), Art. 1. The first paragraph of the Guarantee indicates the parties as Reeve Benaron as guarantor for the benefit of 26460 Ynez, LLC. Complaint, Exh. B (Guarantee), p. 1. The Lease Amendment similarly indicates that the parties are 26460 Ynez, LLC as landlord and My Fat Greek, LLC as tenant. Complaint, Exh. C (Lease Amendment), p. 1.

The complaint does not allege that plaintiff should be construed as a party to any of these agreements. In opposition, plaintiff argues that defendant is the “real party in interest” to the agreements and “may even be considered as the alter ego of the business entities in some of the cases.” OPP (Demurrer) 3:23, 4:6-7. Even assuming this to be the case, they do not establish that plaintiff was a party to the Lease Agreement, Guarantee, or Lease Amendment. Plaintiff therefore lacks standing to sue for breaches of these agreements.

It is possible that plaintiff intended to sue as a successor landlord once he purchased the property (Property) defendants were leasing. See Complaint ¶ 26. The complaint, however, does not allege that plaintiff became a party to any or all of the agreements by virtue of such purchase, and no contracts assigning any of the agreements to plaintiff are attached to the complaint. (The moving papers state that the complaint purports to but does not actually attach escrow documents as Exhibit E. The Court does not even see a reference to Exhibit E at the citation provided by defendant.)

Plaintiff seeks leave to amend, and there appears to be a reasonable possibility of stating this cause of action.

The demurrer is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND.

Second COA: Fraudulent Misrepresentation
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.

The facts constituting the alleged fraud must be alleged factually and specifically as to every element of fraud, as the policy of “liberal construction” of the pleadings will not ordinarily be invoked. Id. at 645. This particularity requirement necessitates pleading facts which “show how, when, where, to whom, and by what means the representations were tendered.” Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73.

Here, the complaint only contains conclusory allegations as to the misrepresentations. See, e.g., Complaint ¶ 39 (defendants “misrepresented certain substantive, material and important facts to [p]laintiff . . . by making affirmative, but false, statements and representations,”), ¶ 40 (defendants “misrepresented certain substantive, material and important facts to [p]laintiff[] by concealing certain substantive, material and important facts,”), ¶ 43 (“Defendants, and each of them, used the provisions of the Lease Agreement, [Guarantee], and [Lease Amendment], in conjunction with their intentional misrepresentations regarding the business prospects of My Big Fat Greek Restaurant . . . in order to justify a grossly over-stated valuation for the premises . . . which they sold to [p]laintiff at such an exorbitant purchase price.”) The complaint does not allege, for instance, how the Property was overvalued, what specific representations were made in connection with the sale of the Property, what was false about such statements, or what defendants were attempting to conceal. These allegations are insufficient to satisfy the heightened pleading standard.

Moreover, although plaintiff alleges he purchased the Property in 2012 and that the Lease Agreement, Guarantee, and Lease Amendment were breached “in or about 2014,” the complaint states again in conclusory terms why the three-year statute of limitations for fraud should be tolled. See CCP § 338(d) (statute of limitations for fraud is three years but does not “accrue[] until the discovery, by the aggrieved party, of the facts constituting the fraud”); Complaint ¶ 60 (“It was not until several months ago, in or about 2017, that [p]laintiff discovered that [d]efendants, and each of them, had defrauded [p]laintiff.”) In order to rely on the delayed discovery rule, the complaint must specifically plead facts showing how and when the delayed discovery was made any why it could not have been made earlier. Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 808 (“In order to rely on the discovery rule for delayed accrual of a cause of action, ‘[a] plaintiff whose complaint shows on its face that his claim would be barred without the benefit of 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.’ [Citation.] In assessing the sufficiency of the allegations of delayed discovery, the court places the burden on the plaintiff to ‘show diligence’; ‘conclusory allegations will not withstand demurrer.’ [Citation.]”) Plaintiff has not done so here.

Plaintiff seeks leave to amend; however, there does not appear to be a reasonable possibility of stating this cause of action.

The demurrer is SUSTAINED WITHOUT LEAVE TO AMEND.

Third COA: Constructive Fraud

“A fiduciary must tell its principal of all information it possesses that is material to the principal’s interests. [Citations.] A fiduciary’s failure to share material information with the principal is constructive fraud, a term of art obviating actual fraudulent intent. [Citation.]” Michel v. Palos Verdes Network Group, Inc. (2007) 156 Cal.App.4th 756, 762.

This cause of action also fails for lack of sufficient particularity. The complaint’s allegations are bare-boned and, among other deficiencies, do not articulate why defendants would owe any fiduciary duty to plaintiff in selling the Property or otherwise. The complaint instead simply alleges that defendants breached a purported fiduciary duty to plaintiff. See Complaint ¶ 66 (“The Breach of Duty, by [d]efendants, and each of them, was, and continues to be, in the context of a confidential and fiduciary relationship between [d]efendants, and each of them, and [p]laintiff, during the transitional years of their financial dealings.”)

As with the second cause of action, the complaint fails to specifically plead facts justifying reliance on the delayed discovery rule.

The demurrer is SUSTAINED WITHOUT LEAVE TO AMEND.

Fourth COA: Violation of Business and Professions Code Section 17200

The Unfair Business Practices Act (Bus. & Prof. Code § 17000, et seq.) prohibits unlawful, unfair, or fraudulent business acts or practices. 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. To have standing to bring an action under this statute, and individual must have suffered injury and lost money or property as a result of unfair competition. Bus. & Prof. Code § 17204; Californians for Disability Rights v. Mervyn’s, LLC (2006) 39 Cal.4th 223, 228-229.

As defendant notes, to the extent plaintiff relies on the “unlawful” or “unfair” prongs, the cause of action fails because it relies merely on conclusory allegations. See, e.g., People v. McKale (1979) 25 Cal.3d 625, 635 (supporting facts required to state “unlawful” claim); Scripps Clinic v. Superior Court (2003) 108 Cal.App.4th 917, 940 (public policy upon which an “unfair” claim can be predicated must be “tethered to specific constitutional, statutory or regulatory provisions.”) To state a UCL violation under the “fraudulent” prong, moreover, plaintiff must at a minimum allege that members of the public are likely to be deceived by defendants’ conduct. See Kunert v. Mission Financial Services Corp. (2003) 110 Cal.App.4th 242, 2643 (“The term ‘fraudulent’ as used in Business and Professions Code section 17200 requires only a showing that members of the public are likely to be deceived.”). Because the complaint lacks the required particularity, this cause of action fails.

Further, as with the second and third causes of action, the complaint fails to specifically plead facts justifying reliance on the delayed discovery rule.

The demurrer is SUSTAINED WITHOUT LEAVE TO AMEND.

Motion to Strike Standard

The court may, upon a motion, or at any time in its discretion, and upon terms it deems proper, strike any irrelevant, false, or improper matter inserted in any pleading. CCP § 436(a). The court may also strike all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court. CCP § 436(b). It may be an abuse of discretion to deny leave to amend after granting a motion to strike a complaint if the defect is curable. CLD Const., Inc. v. City of San Ramon (2004) 120 Cal.App.4th 1141, 1146-1147.

Motion to Strike Analysis

Defendant moves to strike punitive damages from the second, third, and fourth causes of action and monetary forms of relief from the fourth cause of action.
Because the demurrer as to every cause of action has been sustained, the motion to strike is DENIED AS MOOT.ConclusionThe demurrer is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND as to the first cause of action and SUSTAINED WITHOUT LEAVE TO AMEND as to the second, third, and fourth causes of action. The motion to strike is DENIED AS MOOT. Defendant to give notice.