Case Number: SC127877 Hearing Date: October 16, 2018 Dept: M

CASE NAME: Stephen Dewar et al. v. Leo E. Orr, Jr. et. al.

CASE NO.: SC127877

Complaint filed: 7/28/2017

HEARING DATE: 10/16/2018

Trial date: N/A

MEET & CONFER? Yes

Discovery cutoff per CCP §2024.020(a) C/O: N/A

NOTICE per CCP §1005(b): Ok

Motion cutoff per CCP §2024.020(a): N/A

SUBJECT: DEMURRER TO SECOND AMENDED CROSS COMPLAINT, MOTION TO STRIKE PORTIONS OF SECOND AMENDED CROSS-COMPLAINT

MOVING PARTY: Cross-Defendants Christopher Roscoe and Pickford Real Estate, Inc.

RESP. PARTY: Cross-Complainants Stephen Dewar and Sandra Dewar

BACKGROUND

Cross-Complainants leased a condominium from its owners, Cross-Defendants Leo and Marion Orr. Cross-Defendant Christopher Roscoe acted as a dual agent in this transaction, representing both the Orrs and the Cross-Complainants. Before Cross-Complainants finalized the lease, Roscoe allegedly represented to them that the condominium was move-in ready. Additionally, during an early showing of the unit, Roscoe allegedly became aware that the toilet needed repairs, and promised to take care of the issue. Cross-Complainants allege that the toilet never received the necessary repairs.

When Cross-Complainants moved into the condominium, they discovered that it lacked hot water. Cross-Complainants contacted the Orrs regarding this defect, who sent a plumber to install a hot water heater. The plumber, however, did not remedy the problem. After three weeks without hot water, Cross-Complainant Steven Dewar contacted the Orrs to cancel the lease. Cross Complainants allege that they suffered physical and emotional stress during their period without hot water, and that they incurred moving costs of approximately $1,250 after cancelling the lease.

The Second Amended Cross-Complaint (SACC) contains causes of action for 1. Breach of Contract, 2. Breach of Covenant of Good Faith and Fair Dealing, 3. Breach of Covenant of Quiet Enjoyment, 4. Rescission, 5. Nuisance, 6. Intentional Infliction of Emotional Distress, 7. Negligent Infliction of Emotional Distress, 8. Negligence, 9. Wrongful Eviction, 10. Constructive Eviction, 11. Uncured Building Violations, 12. Intentional Misrepresentation and 13. Negligent Misrepresentation

Cross-Defendants demur to the First, Eighth, Twelfth, Thirteenth, and Fourteenth Causes of Action on the grounds that Cross-Complainants have failed to state sufficient facts. Cross-Defendants also move to strike Cross-Complainants’ Request for Punitive Damages.

TENTATIVE RULING

Cross-Defendants’ Demurrer is OVERRULED as to the First, Eighth, and Thirteenth Causes of Action.

Cross-Defendants’ Demurrer is SUSTAINED with ten days leave to amend as to the Twelfth and Fourteenth Causes of Action.

Cross-Defendants’ Motion to Strike is GRANTED with ten days leave to amend.

ANALYSIS

Demurrer Standard

A demurrer accepts as true all well pleaded and judicially noticeable facts, but not deductions, contentions, or conclusions of law or fact. (Fox v. JAMDAT Mobile, Inc. (2010) 185 Cal.App.4th 1068, 1078.) When there are unexplained contradictions between exhibits and the allegations, the allegations are disregarded as surplusage. (Edgerly v. City of Oakland (2012) 211 Cal.App.4th 1191, 1198.) When the exhibits are ambiguous, the construction urged by plaintiff will be accepted as true unless patently absurd or incorrect. (Chisolm v. Board of Retirement (2013) 218 Cal.App.4th 400, 410-411.) A demurrer is all-or-nothing, i.e., no demurrer to a portion of a cause of action. (People v. Union Pacific R. Co. (2006) 141 Cal.App.4th 1228, 1243.)

A general demurrer challenges the sufficiency of the pleading as a matter of law and must not be sustained if the facts show an entitlement to some relief. (Collier v. Superior Court (1991) 228 Cal.App.3d 1117, 1120.) “To survive a demurrer, the complaint need only allege facts sufficient to state a cause of action; each evidentiary fact that might eventually form part of the plaintiff’s proof need not be alleged.” (C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872.)

A special demurrer for uncertainty, Code of Civil Procedure §430.10(f), is disfavored and will only be sustained where the pleading is so bad that defendant cannot reasonably respond—i.e., cannot reasonably determine what issues must be admitted or denied, or what counts or claims are directed against him/her. (Khoury v. Maly’s of Calif., Inc. (1993) 14 Cal.App.4th 612, 616.) Moreover, even if the pleading is somewhat vague, “ambiguities can be clarified under modern discovery procedures.” (Id.)

First Cause of Action for Breach of Contract

To prevail on a cause of action for breach of contract, Plaintiff must establish: (1) the existence of contract between Plaintiff and Defendants; (2) Plaintiff’s performance or excuse for nonperformance; (3) the Defendants’ breach; and (4) any resulting damages. (E.g., Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1388.)

Cross-Defendants demur in part on the ground that real estate agents do not owe lessees a duty to investigate whether a real property has certain latent defects which are not apparent to a visual inspection. (Demurrer at pgs. 8:17-8:25.) This cause of action, however, is based on an alleged breach of a contractual duty, not a breach of a legally-imposed duty arising out of Cross-Defendant’s status as a real estate agent. Thus, this argument is irrelevant here.

Cross-Defendants also argue that “cross-complainants do not, and cannot cite to any agreement or contract they entered into with Roscoe or Pickford, and cross-complainants do not allege the terms or conditions of any alleged contract.” (Demurrer at pgs. 8:7-8:16.) The Cross-Complainant alleges that cross-defendants orally and impliedly contracted to “handle any issues with the unit” once cross-complainants moved in and in return Cross-Complainant utilize cross-complainant as their agent. (SACC at ¶30.) Cross-Defendants allegedly breached this agreement by failing to take any action to repair the broken toilet. (SACC at pgs. 5:23-6:13.)

While the alleged oral or implied contract may be subject to an attack as to whether there was adequate consideration to constitute a binding legal contract, this Court finds it sufficient to survive this demurrer. Cross-Defendants’ Demurrer to Cross-Complainants’ First Cause of Action for Breach of Contract is therefore OVERRULED.

Eighth Cause of Action for Negligence

The elements of negligence are a duty the defendant owes to the plaintiff, a breach of that duty by the defendant, a causal connection between the breach and the plaintiff’s injury, and actual injury. (Williams v. Beechnut Nutrition Corp. (1986) 185 Cal.App.3d 135, 141; 4 Witkin, Cal. Procedure (4th ed. 1997) Pleading, § 537, p. 624.) In the absence of any one of these elements, no cause of action for negligence will lie. In California, it is clear that negligence may be pleaded in general terms. (Landeros v. Flood (1976) 17 Cal.3d 399, 407-408.) A real estate broker has an affirmative duty to conduct a reasonably competent and diligent visual inspection of residential property listed for sale and to disclose to a prospective purchaser all facts materially affecting the value or desirability of the property. (Cal. Civ. Code §20179.)

Cross-Defendants demur to this cause of action on the grounds that “cross-complainants have not alleged Roscoe or Pickford had knowledge of material facts that they failed to disclose, or that there were any conditions cross-defendants should have discovered pursuant to their visual inspection.” (Demurrer at pg. 9:22-10:3.) This mischaracterizes the contents of the FACC. Cross-Complainants clearly state that Cross-Defendant Roscoe “did not do a thorough inspection of the rental unit,” and as a result did not disclose to them that it had no hot water. (FACC at ¶10.) If Cross-Defendants wish to argue that a “reasonably competent and diligent visual inspection” would not have disclosed the lack of hot water, this would be a fact argument, and therefore improper on demurrer.

Cross-Defendants’ Demurrer to Cross-Complainants’ Eighth Cause of Action for Negligence is OVERRULED.

Twelfth and Thirteenth Causes of Action for Intentional and Negligent Misrepresentation

The elements of Intentional Misrepresentation (i.e., fraud) 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 Civil Code §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.) “Fraud must be pleaded with specificity rather than with ‘“‘general and conclusory allegations.’”’ (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184.) The specificity requirement means a plaintiff must allege facts showing how, when, where, to whom, and by what means the representations were made, and, in the case of a corporate defendant, the plaintiff must allege the names of the persons who made the representations, their authority to speak on behalf of the corporation, to whom they spoke, what they said or wrote, and when the representation was made. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.)” (West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 793.)

The elements of negligent misrepresentation are the same, except instead of pleading scienter, a plaintiff must allege that the defendant lacked reasonable ground for believing the representation to be true. (Goonewardene v. ADP, LLC (2016) 5 Cal. App. 5th, 154.)

These causes of action are each based on Cross-Defendant’s alleged false representation that the condominium was in move-in condition, despite the fact that it had habitability issues, including a lack of hot water. (FACC at ¶¶ 83, 86, 89.) Cross-Complainants have set forth the facts surrounding these alleged misrepresentations with sufficient particularity SACC at pgs. 5:23-6:13.) Cross-Complainant has alleged that Roscoe made this representation despite the fact that he had not actually performed a thorough inspection of the unit—thus, they have sufficiently alleged that Cross-Defendant “lacked reasonable ground for believing the representation to be true,” and have adequately set forth a cause of action for negligent misrepresentation. Cross-Complainants have not, however, alleged that Cross-Defendants’ knew or acted with reckless disregard to the probability that the unit actually lacked hot water at the time of the alleged “move-in” representation; in other words, cross-complainant has not pled the element of scienter.

For the foregoing reasons, Cross-Defendants’ demurrer to Cross-Complainants’ Twelfth Cause of Action for Fraud is SUSTAINED with ten days leave to amend and their demurrer to Cross-Complainants’ Thirteenth Cause of Action for Negligent Misrepresentation is OVERRULED.

Fourteenth Cause of Action for Breach of Fiduciary Duty

The elements of a cause of action for Breach of Fiduciary Duty are (1) existence of a fiduciary duty; (2) breach of the fiduciary duty; and (3) damage proximately caused by the breach. (Tribeca Companies, LLC v. First American Title Ins. Co. (2015) 239 Cal.App.4th 1088.)

This Court finds that the SACC sufficiently alleges the existence of a fiduciary duty between the parties as broker/client, but finds that the allegations of breach are insufficient absent an allegation of the broker’s knowledge of the defects. Moving party has failed to provide any authority for their theory that a fiduciary’s negligent failure to investigate will legally constitute a breach of fiduciary duty.

Thus, Cross-Defendants’ demurrer to Cross-Complainants’ Fourteenth Cause of Action is SUSTAINED with leave to amend in 10 days.

Motion to Strike

Cross-Defendants move to Strike Cross-Complainant’s request for punitive damages. Punitive damages are only recoverable when a defendant acts with “malice, oppression or fraud.” (Pacific Gas and Electric Company v. Superior Court (2018) 24 Cal.App.5th 1150.) As explained above-Cross-Complainant has not alleged sufficient facts to give rise to a cause of action for intentional fraud, and none of the other conduct alleged throughout the SACC is egregious enough to constitute malice or oppression.

Cross-Defendants’ Motion to Strike is thus GRANTED with ten days leave to amend.