Case Number: EC068262 Hearing Date: August 24, 2018 Dept: A

Samanukorn v JPCL Development

DEMURRER; MOTION TO STRIKE

Calendar: 10

Case No: EC068262

Hearing Date: 8/24/18

Action Filed: 3/14/18

Trial: Not set

MP: Defendants JPCL Development LLC, Ping Xiao Lin, and Shiann Chen

RP: Plaintiffs Yuwanda Samanukorn and Kan Xie

ALLEGATIONS:

This action involves a dispute regarding real property located at 8946 Emerson Place, Rosemead, CA 91770. Plaintiffs Yuwanda Samanukorn and Kan Xie (“Plaintiffs”) allege they are first time buyers of real estate. They allege that on July 18, 2017, Plaintiffs with the representation of their real estate agents (Defendants Essex Financial, Inc. dba Century 21 Dynasty [“C21”], Hoang M. Chu, and Jade Ngoc Chu), entered into the Residential Purchase Agreement for the property in the amount of $608,000.00 and the sale closed on July 18, 2017. The owner of record and seller of the property was Defendant JPCL Development LLC (“JPCL”), through its agents Defendants CHD Investments Inc. dba IRN Realty (“IRN”) and Ted Ru-Hao Chen. Plaintiffs allege that Defendants Ping Xiao Lin (operating manager of JPCL) and Shiann Chen (alleged spouse of Ping Xiao Lin) worked in concert to use JPCL to deceive and conceal material matters concerning the property from Plaintiffs. Plaintiffs allege that Defendants failed to disclose that the property had easements for ingress and egress for use by 3 adjacent property owners and is used as a driveway or access road to the other properties.

The complaint, filed March 14, 2018, alleges causes of action for: (1) fraud and deceit; (2) negligent misrepresentation; (3) constructive fraud; (4) breach of statutory duty; (5) breach of fiduciary duty; (6) breach of contract; (7) professional negligence; (8) negligent misrepresentation; (9) professional negligence; and (10) breach of implied covenant against encumbrances.

RELIEF REQUESTED:

Defendants JPCL, Ping Xiao Lin, and Shiann Chen (“Defendants”) demur to the 1st, 2nd, 3rd, and 10th causes of action. Defendants also move to strike portions of the complaint.

DISCUSSION:

Demurrer

A. Fraud and Deceit (1st cause of action)

To allege a cause of action for fraud, the requisite elements are: (1) a representation, usually of fact, which is false; (2) knowledge of its falsity; (3) intent to defraud; (4) justifiable reliance upon the misrepresentation; and (5) damage resulting from that justifiable reliance. (Stansfield v. Starkey (1990) 220 Cal. App. 3d 59, 72-73.) This cause of action is a tort of deceit and the facts constituting each element must be alleged with particularity; the claim cannot be saved by referring to the policy favoring liberal construction of pleadings. (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216.) Since the claim must be pleaded with particularity, the cause of action based on misrepresentations must allege facts showing how, when, where, to whom, and by what means the misrepresentations were tendered. (Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73.)

Defendants demur to the 1st cause of action, arguing that Plaintiffs admit in their complaint that Defendants did in fact disclose the easement at issue, and that Plaintiffs have not alleged proximate cause or justifiable reliance.

In the complaint, Plaintiffs allege that Defendants made written representations through a Transfer Disclosure Statement (“TDS”) and Seller Property Questionnaire (“SPQ”), which were false and/or misleading because they failed to disclose the existence of an easement. (Compl., ¶¶19, 29.) Plaintiffs allege that in the TDS, the seller Defendants disclosed that the property did not share a driveway with adjoining landowners and that “Yes” there were easements or encroachments on the property. (Id., ¶21.) Plaintiffs also allege that in the SPQ, the sellers disclosed that they were not aware of any easement/encroachment disputes, that there was an easement on the west side, and that they were not aware of any documents pertaining to easements. (Id., ¶22.) Plaintiffs allege they became aware of an easement for ingress and egress for use by 3 property owners adjacent to or near the property and is in essence a driveway or access road (“Undisclosed Easement”). (Id., ¶24.)

Based on the allegations of the complaint, the facts appear to admit that Defendants did make the necessary disclosures. At most, Plaintiffs alleged that Defendants misrepresented that the property did not share a driveway with adjoining landowners based on the disclosure made in the TDS, but correctly stated that there was an easement on the west side of the property.

In opposition, Plaintiffs argue that they clearly alleged a non-disclosure of the Undisclosed Easement in the complaint, but admit that Defendant disclosed water pipeline easements which coincidentally also allow for ingress and egress on the west side of the property. Though Defendants disclosed an easement on the west side of the property, Plaintiffs explain that they believed this referred to a water pipeline easement. However, facts regarding the water pipeline easements were not alleged in the first cause of action to make clear that Defendants only informed Plaintiffs about three of four total easements on the property (rather, such allegations were alleged starting in the second cause of action).

As the allegations in the complaint do not allege these facts, the fraud cause of action as worded is uncertain. Nevertheless, Plaintiffs have shown in their opposition that the allegations are curable upon amendment.

In addition, the allegations regarding justifiable reliance and proximate cause are not alleged with particularity. In the 1st cause of action, Plaintiffs allege that Defendants intended them to rely on the representations and that Plaintiffs did in fact rely on Defendants’ TDS and SPQ because they presumed it was reviewed by the listing agents and selling agents, and they had no reason to believe that the TDS, SPQ, or Defendants’ conduct were deceitful. (Compl., ¶¶30-31.) Plaintiffs allege that they justifiably relied on the representations and reliance was a substantial factor in causing Plaintiffs’ harm. (Id., ¶34.) While the allegations allege in a conclusory fashion that Plaintiffs relied on Defendants’ representations and they were thereby damaged, the allegations are not set forth with the requisite specificity required for a fraud cause of action.

Thus, the Court will sustain the demurrer to the 1st cause of action with 20 days leave to amend.

B. Negligent Misrepresentation (2nd cause of action)

To allege a cause of action for negligent misrepresentation, the requisite elements are: (1) a misrepresentation of a past or existing material fact; (2) without reasonable grounds for believing it to be true; (3) with intent to induce another’s reliance on the fact misrepresented; (4) ignorance of the truth and justifiable reliance thereon by the party to whom the misrepresentation was directed; and (5) damages. (B.L.M. v. Sabo & Deitsch (1997) 55 Cal. App. 4th 823, 834.) This too is a tort of deceit that must be alleged with particularity.

Defendants demur to the 2nd cause of action, arguing that Plaintiffs admit in their complaint that Defendants did in fact disclose the easement at issue in this action.

The allegations of the 2nd cause of action are similar to that of the 1st cause of action. (See Compl., ¶¶40-45.) However, in this cause of action, Plaintiffs allege that the representations were false and misleading because Defendants led Plaintiffs to believe that the disclosures made were for insignificant underground pipeline easements. (Compl., ¶40(d).) Thus, Plaintiffs have adequately alleged an actionable misrepresentation by Defendants.

Defendants also argue that the complaint fails to allege that the misrepresentation proximately caused damages, i.e., that Plaintiffs’ reliance on Defendants’ representations was a substantial factor in causing their harm. Plaintiffs allege reliance and damages in a conclusory fashion in paragraphs 44 and 45 of the complaint. Thus, the allegations of the 2nd cause of action fail for the same reasons the 1st cause of action’s allegations of reliance and causation fail.

The Court will sustain the demurrer to the 2nd cause of action with 20 days leave to amend.

C. Constructive Fraud (3rd cause of action)

A constructive fraud cause of action is defined in Civil Code, §1573. It arises on a breach of duty by one in a confidential or fiduciary relationship to another which induces justifiable reliance by the latter to his prejudice. (Estate of Gump (1991) 1 Cal.App.4th 582, 601.) Generally, it is comprised of “all acts, omissions and concealments involving a breach of legal or equitable duty, trust, or confidence, and resulting in damages to another.” (Id.)

In the 3rd cause of action, Plaintiffs allege that the Seller and Listing Agents had a duty to disclose facts materially affecting the value, desirability, and intended use of the property. (Compl., ¶47.) Plaintiffs allege they had a fiduciary duty to Plaintiffs, which they breached by failing to explain or investigate the inconsistencies made in the TDS and SPQ. (Id., ¶¶48-51.) Plaintiffs allege that as a result of Defendants’ omission, Plaintiffs were damaged. (Id., ¶52.)

Defendants argue that this cause of action fails because Plaintiffs have not pled sufficient facts to show a misrepresentation or justifiable reliance, based on the same reasons as argued in the 1st and 2nd causes of action.

Here, Defendants have sufficiently alleged an omission by Defendants, i.e., failure to disclose the Undisclosed Easement to Plaintiff. The 3rd cause of action also alleges that Plaintiffs relied on Defendants based on their fiduciary relationship, and this reliance caused them damages.

This cause of action alleges sufficient facts against Defendants. Thus, the Court will overrule the demurrer to the 3rd cause of action.

D. Breach of Implied Covenant against Encumbrances (10th cause of action)

In California, “a covenant against encumbrances, implied in a grant of real estate under section 1113, imposes a personal obligation on the grantor; and that where there are two or more grantors, such obligation is joint and several, and is binding on one of them, although he may have no interest in the land at the time of the execution of the grant.” (Evans v. Faught (1965) 231 Cal.App.2d 698, 712.)

In this cause of action, Plaintiffs allege that Defendants/sellers impliedly covenanted that the property was free and clear of all lines and encumbrances, including the Undisclosed Easement. (Compl., ¶96.) They allege they did not learn of the Undisclosed Easement until November 2017 and that this caused them damages in the approximate sum of $608,000.00. (Id., ¶¶97-98.)

Defendants demur to this cause of action, arguing that Plaintiffs admit that Defendants disclosed the easement at issue. The 10th cause of action incorporate the prior allegations, including the allegation in the 2nd cause of action where Plaintiffs explain that some easements were disclosed in a misleading manner, but not the Undisclosed Easement. (See Compl., ¶40(d).) Taking the allegations as true in considering a demurrer, Plaintiffs have alleged sufficient facts to show that there is an undisclosed easement or encumbrance on the property.

The Court will overrule the demurrer to the 10th cause of action.

Motion to Strike

The court may, upon a motion, or at any time in its discretion, strike out any irrelevant, false or improper matter contained in a pleading, or parts of any pleading that has not been drawn or filed in conformity with the laws. (CCP §436.) In ruling on a motion to strike, the allegations of the pleading are read as a whole, all parts in their context, and the truth of the allegations are assumed. (Clauson v. Superior Court (1998) 67 Cal.App.4th 1253, 1255.) The grounds for moving to strike must appear on the face of the pleading or by way of judicial notice. (CCP §437.) A motion to strike is the procedure to attack an improper remedy. (Venice Town Council, Inc. v. City of Los Angeles (1996) 47 Cal.App.4th 1547, 1561-62.)

Defendants move to strike: (1) the word “Undisclosed” from “Undisclosed Easement”; (2) the word “False” from “False TDS Disclosures”; and (3) the request for punitive damages in the prayer for damages.

Defendants move to strike the words “Undisclosed” and “False” from “Undisclosed Easement” and “False TDS Disclosures”, arguing that they amount to irrelevant matter and are not pertinent or supported by the claims or defenses. They argue that Plaintiffs admit in the complaint that Defendants disclosed the easement at issue. However, as discussed in the demurrer analysis, Plaintiffs have alleged facts showing that Defendants misled them to believe that underground pipeline easements existed (including on the west side of the property), but not that a driveway easement existed. Thus, the descriptive terms “Undisclosed” and “False” are not irrelevant and are supported by the allegations. On ruling on a motion to strike, the Court takes the allegations of the pleading as true. The Court will deny the motion to strike these terms.

Next, Defendants move to strike the request for punitive damages. A complaint including a request for punitive damages must include allegations showing that the plaintiff is entitled to an award of punitive damages. (Clauson v. Superior Court (1998) 67 Cal.App.4th 1253, 1255.) A claim for punitive damages cannot be pleaded generally and allegations that a defendant acted “with oppression, fraud and malice” toward plaintiff are insufficient legal conclusions to show that the plaintiff is entitled to an award of punitive damages. (Brousseau v. Jarrett (1977) 73 Cal.App.3d 864, 872.) Specific factual allegations are required to support a claim for punitive damages. (Id.)

Civil Code §3294 authorizes a plaintiff to obtain an award of punitive damages when there is clear and convincing evidence that the defendant engaged in malice, oppression, or fraud. Section 3294(c) defines the terms in the following manner:

“Malice” means conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.

“Oppression” means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights.

“Fraud” means an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury

The only allegations against Defendants for punitive damages is in the 1st cause of action. In light of the ruling on the demurrer to the 1st cause of action, the motion to strike punitive damages in connection with the 1st cause of action is moot. Further, the Court notes that the allegations in paragraph 37 of the complaint are conclusory. Paragraph 37 alleges that Defendants’ conduct was “willful, intentional, oppressive, malicious, despicable, and undertaken with a total disregard for the welfare of Plaintiffs”. This fails to rise to a level warranting punitive damages.

The Court will deem the motion to strike the allegations for punitive damages moot in light of the ruling on the demurrer and take the same off calendar.

RULING:

Sustain the demurrer to the 1st and 2nd causes of action with 20 days leave to amend.

Overrule the demurrer to the 3rd and 10th causes of action.

Deny the motion to strike the terms “Undisclosed” from “Undisclosed Easement”, and “False” from “False TDS Disclosures”.

Deem the motion to strike punitive damages moot in light of the ruling on the demurrer.