2012-00120027-CU-BC

VV Florin Perkins LLC vs. Trong Nguyen

Nature of Proceeding: Hearing on Demurrer

Filed By: Peterson, K. Greg

Defendant Trong Nguyen’s demurrer to Plaintiffs VV Florin Perkins (VVFP) and
Vertical Ventures Capital, LLC’s (VVC) First Amended Complaint (“FAC”) is ruled upon
as follows.

Defendant’s unopposed request for judicial notice is granted.

In this action Plaintiffs allege Defendant breached a duty to pay rent under the terms of
a lease agreement (“Lease”) regarding a piece of commercial property and that he
made a number of misrepresentations regarding his commitment to stay as a tenant .
Plaintiffs allege causes of action for breach of contract, promissory estoppel,
promissory fraud, negligent misrepresentation and concealment.

Entire FAC

Defendant’s demurrer to the entire FAC on the basis that the Lease terminated in
September 1, 2011 thereby precluding any cause of action is overruled. Even though
as discussed below in connection with the First Cause of Action for Breach of
Contract, Defendant is correct that as pled, the allegations show that the Lease
terminated on September 1, 2011, the entire FAC does not fail for this reason. Indeed,
Plaintiffs alleged numerous causes of action which do not depend on the existence of
the Lease, specifically, promissory estoppel and fraud based causes of action.

First Cause of Action (Breach of Contract)

Defendant’s demurrer is sustained with leave to amend for failure to state facts
sufficient to constitute a cause of action. Defendant argues that this cause of action
fails because VVFP fails to allege performance because it never owned the property
and therefore could not deliver possession by the September 1, 2011, date set forth in
the Lease. He reasons that the Lease thereafter expired on its own terms on
September 1 when possession was not delivered.

Plaintiffs essentially concede that they have not alleged facts showing that they owned
the property prior to September 1, but argue that a tenant cannot deny the landlord’s
title. While this is generally true, it is subject to exceptions, specifically where the
tenant was in possession of the property before the lease and therefore not placed in
possession by the landlord. (Strong v. Baldwin (1908) 154 Cal. 150, 161-162.) Here,
the FAC alleges facts showing that Defendant was in possession of the property from
the time he purchased the property and through the time after which he lost the
property to Cathay Bank through foreclosure. (FAC ¶¶ 8, 9.) It is never alleged that
he was not in possession. Thus, Defendant can properly challenge Plaintiffs’ title.

Here, as seen from the Lease, the Lease terminated by its own terms on September 1,

2011, when Plaintiffs failed to deliver possession of the property. “[I]f possession of
the Premises is not delivered within four months after the Commencement Date, this
Lease shall terminate unless other agreements are reached between Lessor and
Lessee, in writing.” (Def.’s RJN Exh. C, Lease § 3.3.) Plaintiffs argue that the lease
was extended beyond September 1, 2011, but they concede they have not alleged
facts that they entered into an agreement in writing which agreement to extend the
lease which was required to avoid termination of the lease in the event possession
was not delivered. (Oppo. 7:13-15 [Plaintiff “never expressly alleges that [VVFP]
entered into such an agreement].) As a result the demurrer is sustained with leave to
amend on the basis that the Lease terminated by its terms on September 1, 2011, and
Plaintiffs have not alleged that they entered into a written agreement to extend that
date.

Further, while Plaintiffs argue that Defendant’s failure to satisfy the condition in the
Lease regarding liability insurance excused their obligation to deliver possession, they
admit that no such facts are alleged in the FAC and thus the Court does not consider
this unpled theory on this demurrer. In addition, they also argue that Defendant’s
conduct after September 1, 2011 created a periodic tenancy which would also support
a breach of contract but again concede that this theory is not in the complaint and thus
it is not addressed in this ruling. The Court, however, grants leave to amend to allege
these theories.

The demurrer is sustained with leave to amend. While Defendant argues that leave
should not be given, the Court grants leave as this is the first challenge to the pleading
(Plaintiffs filed the FAC pursuant to a stipulation between the parties).

Second Cause of Action (Promissory Estoppel)

Defendant’s demurrer is overruled. Defendant argues that the doctrine of promissory
estoppel does not apply where the alleged promise was supported by consideration.
“[A] plaintiff cannot state a claim for promissory estoppel when the promise was given
in return for consideration. The claim instead must be pleaded as one for breach of
the bargained-for-contract.” (Fontenot v. Wells Fargo Bank, N.A. (2011) 198
th
Cal.App.4 256, 275.) Plaintiffs allege that Defendant “promised he would remain as a
tenant on a five-year lease” and that they signed the lease in May 2011 “in an attempt
to codify that promise in a binding written agreement.” (FAC ¶ 115.) Defendant points
to a number of allegations in the FAC, specifically, allegations at paragraphs 11 and 12
of the FAC regarding emails in which the parties discussed Plaintiffs making
improvement to the Property, etc. However, none of these issues are alleged to have
been consideration for the alleged promise to remain as a tenant for five years.
Moreover, while Defendant argues that the consideration was also supplied by the
Lease itself, the promise at issue in this cause of action goes beyond simply entering
the Lease, but concerns a promise to remain as a tenant for five years. Thus, the
alleged defect, specifically that the promise at issue was supported by consideration,
does not appear on the face of the FAC and the demurrer on this basis is overruled.

Defendant also demurs on the basis that any oral promise on his part to remain a
tenant for five years is precluded by the merger clause in the Lease which provides
that “no other prior or contemporaneous agreement or understanding shall be
effective.” However, given that this cause of action does not depend upon a contract,
and in fact can only exist where the traditional elements of a contract cause of action
cannot be shown, they are considered distinct and alternate theories of recovery and

mutually exclusive. (Douglas E. Barnhart, Inc. v. CMC Fabricators (2012) 211
th
Cal.App.4 230, 243.) Thus, if Plaintiffs did not ultimately succeed on a contract cause
of action, for example, because there was no valid contract, the merger clause in the
contract is irrelevant and they could theoretically succeed on this alternate and distinct
cause of action.

Third and Fourth Causes of Action (Promissory Fraud)

Defendant’s demurrer is overruled. Defendant demurs to the Third and Fourth Causes
of Action which allege that Defendant falsely promised to VVFP and VVC that he
would remain as a tenant for five years on the basis that Plaintiff failed to properly
allege “indirect misrepresentation.” Defendant argues that although it is alleged that
the misrepresentations were made to VVCC’s and VVFP’s agent Rezaopour, there are
no allegations that Defendant knew he was acting as their agent. No authority is cited
that such an allegation is required and in any event, such knowledge is fairly inferred
from the body of the FAC and the allegations that Defendant was negotiating with
Rezaapour (alleged to be the manager of VVC and VVFP) with respect to a lease, and
that Defendant made the alleged representations to Rezapour “in his capacity as an
agent for (VVF and VVFP).” (FAC ¶¶ 123, 132.) The demurrer on this ground is
overruled.

Defendant also demurs to these two causes of action on the basis that the FAC shows
that he kept his alleged promise to sign a lease. The demurrer on this basis is
overruled. The alleged false promise is that Defendant promised to remain as a tenant
for five years, not that he would simply sign a lease.

Fifth and Sixth Causes of Action (Negligent Misrepresentation)

Defendant’s demurrer is overruled. Defendant argues that Plaintiffs failed to allege
any false statement of fact. Here, Plaintiffs allege that Defendant falsely stated that he
“[would] have an electrical contractor who will sublease from me and pay
$2,000/month” and that “for the whole scheme, we pay roughly $5K which is very
affordable for use and we have to pay either there or elsewhere.” (FAC ¶¶ 141, 150.)
While Defendant argues these statements are non-actionable opinions, the Court
disagrees, at least with respect to the statement regarding the affordability of the
monthly rent. Defendant incorrectly characterizes the statement as of a statement of
opinion as to whether rent “will be” affordable at some time in the future. But Plaintiffs
did not allege that he said the rent “will be” affordable, rather they allege that he said it
“is” affordable for him which constitutes a statement regarding Defendant’s existing
financial condition, not a prediction of a future event. (FAC ¶¶ 141, 150.) Given this,
the Court need not address the arguments with respect to the other allegedly false
statement. The demurrer is therefore overruled.

In addition, Defendant also demurs on the basis that Plaintiffs failed to adequately
allege “indirect misrepresentation” as he did in connection with the third and fourth
causes of action. The demurrer on this basis is overruled for the same reasons the
demurrer to those causes of action was overruled.

Eighth Cause of Action (Concelament)

The demurrer is overruled. Once again Defendant argues that Plaintiffs failed to allege
“indirect misrepresentation” as he did in connection with the third and fourth causes of

action. The demurrer on this basis is overruled for the same reasons the demurrer to
those causes of action was overruled.

As a result, the demurrer is sustained with leave to amend as to the first cause of
action and overruled as to the remaining causes of action.

Plaintiffs may file and serve a second amended complaint no later than December 13,
2013. Defendant shall file and serve his response within 15 days thereafter, 20 days if
the second amended complaint is served by mail. (Although not required by any
statute or rule of court, Plaintiffs are requested to attach a copy of the instant minute
order to the second amended complaint to facilitate the filing of the pleading.)

The minute order is effective immediately. No formal order pursuant to CRC Rule
3.1312 or other notice is required.