Case Number: BC516332    Hearing Date: July 09, 2014    Dept: 32

CASE NAME: IV Solutions, Inc. v. Alicia Rubalcaba de Reynoso, et al.
CASE NO.: BC516332
HEARING DATE: 07/09/14
DEPARTMENT: 32
CALENDAR NO.: 4
SUBJECT: Demurrer to First Amended Complaint (“FAC”)
Motion to Strike(“MTS”)
MOVING PARTY: (1)-(2) Defendants Steven Friedman and Alicia Rubalcaba de Reynoso (“Defendants”)
RESP. PARTY: (1)-(2) Plaintiff IV Solutions, Inc. (“Plaintiff”)

COURT’S TENTATIVE RULING

Demurrer to First Amended Complaint

First Cause of Action (Fraud) OVERRULED.
Second Cause of Action (Breach of written contract) OVERRULED.
Third Cause of Action (Breach of oral contract) OVERRULED.
Fifth Cause of Action (Equitable lien) OVERRULED.
Sixth Cause of Action (Conversion) OVERRULED.
Seventh Cause of Action (Unfair competition pursuant to B&P Code §17200 et seq) OVERRULED.
Eighth Cause of Action (Unjust enrichment) OVERRULED.
Ninth Cause of Action (Money had and received) OVERRULED.
Tenth Cause of Action (Goods and services rendered) OVERRULED.
Eleventh Cause of Action (Promissory estoppel) OVERRULED.
Twelfth Cause of Action (Quantum meruit) OVERRULED.
Demurrer for Uncertainty OVERRULED.

Motion to Strike

Paragraph 2 of the Prayer (Punitive Damages) DENIED.
Paragraph 3 of the Prayer (Restitution) DENIED.

ANALYSIS

General Demurrer

Defendants demur to the first through third and fifth through twelfth causes of action for failure to state a claim.

A general demurrer challenges only the legal sufficiency of the complaint, not the truth of its factual allegations or the plaintiff’s ability to prove those allegations. (Picton v. Anderson Union High Sch. Dist. (1996) 50 Cal.App.4th 726, 732.) The court must treat as true all of the complaint’s material factual allegations, but not contentions, deductions or conclusions of fact or law. (Id. at 732-33.) The complaint is to be construed liberally to determine whether a cause of action has been stated. (Id. at 733.)

Demurrer Based on Grounds Overruled in Court’s December 18, 2013 Ruling

On December 18, 2013, the court (per Judge Mary H. Strobel) overruled Defendants’ demurrer to the second cause of action for breach of written contract (as to Defendant Friedman); the third cause of action for breach of oral contract; the eighth cause of action for unjust enrichment; the ninth, tenth, and twelfth causes of action for common counts; and the eleventh cause of action for promissory estoppel. The court also overruled Defendants’ demurrer for uncertainty, and rejected their demurrer based on public policy grounds.

Defendants have demurred to these causes of action in the FAC (which was filed January 17, 2014) based on the same or similar arguments already rejected by the court. Defendants did not move for reconsideration of the court’s prior ruling, and thus the instant demurrer is procedurally improper insofar as it asserts arguments already overruled. (See CCP § 1008.) However, Defendants assert in reply that the FAC adds new allegations not previously considered by the court and seek to have the court effectively treat the FAC as an entirely new pleading. The court will address the demurrer based on these amended allegations.

Public Policy

This case arises from an underlying personal injury case in which Defendant De Reynoso sued MacDonald’s with Defendant Friedman as her attorney (FAC ¶8). Plaintiff alleges that it provided specialty medical infusion services to De Reynoso for the injuries she sustained in the MacDonald’s incident (FAC¶ 7, 10).

Defendants contend that all of Plaintiff’s claims violate public policy because the complaint implies that Friedman offered to pay De Reynoso’s medical bills with Plaintiff in consideration for testimony by Plaintiff’s employees that would enhance the settlement value of De Reynoso’s underlying personal injury action against McDonalds i.e., that what is being alleged is an improper agreement for the payment for testimony. The court rejected this argument in its December 18, 2013 ruling, and Defendants has not shown any material changes in the FAC with respect to this argument.

According to the complaint, Defendant Friedman acted as attorney for Defendant De Reynoso in a separate personal injury action where De Reynoso sued McDonald’s for injuries. In connection with the underlying personal injury action, Plaintiff’s employees Alex Vara and Marlene Casillas were deposed regarding the cost of medications and services that Plaintiff provided to De Reynoso. On May 4, 2010, Friedman entered a written agreement with Plaintiff, whereby Friedman assumed financial responsibility for 100% of the billed charges for Plaintiff’s services and treatment rendered to De Reynoso between April 14, 2010 and May 5, 2010. (Compl. ¶¶ 7-14, Exh. A.) The FAC makes similar allegations. (FAC ¶¶ 7-17.)

The crux of Defendants’ argument is that “[a] contract is void whereby one agrees to obtain or procure testimony of certain facts which will successfully support or defeat a lawsuit, or which provides that payment to the party procuring such testimony is to be contingent upon the result of the action for which he is engaged to procure it.” (Hare v. McGue (1918)
178 Cal. 740, 741; Von Kesler v. Baker (1933) 131 Cal.App. 654 [contract for payment of percentage of recovery to expert witness void as contrary to public policy].)

Although it seems possible from the FAC that the testimony of Mr. Vara and Ms. Casillas were part of the consideration for the contract with Friedman that is not expressly alleged and such interpretation is not required based on the pleading. That view of the contract can be explored in discovery. However, the gravamen of the breach of contract claim is that Plaintiff provided medical services and products to De Reynoso and that Friedman assumed De Reynoso’s liabilities for the same. This type of contract does not violate public policy. Therefore, because Defendants’ demurrer raises a factual question outside the four corners of the pleading, i.e., a different purpose for the alleged contract, the public policy argument is unpersuasive at this point in the proceedings.

First Cause of Action – Fraud

To state a cause of action for fraud, a plaintiff must allege: (1) misrepresentation; (2) knowledge of falsity (or “scienter”); (3) intent to defraud (induce reliance); (4) justifiable reliance; and, (5) resulting damage. (Charnay v. Cobert (2006) 145 Cal.App.4th 170, 184.) Fraud actions are subject to strict requirements of particularity in pleading. A plaintiff must allege what was said, by whom, in what manner (i.e. oral or in writing), when, and, in the case of a corporate defendant, under what authority to bind the corporation. (See Goldrich v. Natural Y Surgical Specialties, Inc. (1994) 25 Cal.App.4th 772, 782.; Tarmann v. State Farm Mutual Auto Ins. Co. (1991) 2 Cal. App.4th 153, 157.)

The complaint alleges that “both De Reynoso and Friedman represented to [Plaintiff] that they would pay the full amounts due for medications and services provided to De Reynoso from the funds obtained in connection with De Reynoso’s separate personal injury lawsuit.” (Compl. ¶ 16.)

The court sustained the demurrer to the fraud count in the original complaint because Plaintiff had not alleged when the false statement was made or by what means. In the FAC, Plaintiff alleges that “prior to IV Solutions providing products and services to De Reynoso beginning in February 2010, both De Reynoso and Friedman orally (and subsequently in writing) represented to IV Solutions that they would pay the full billed charges due for medications and services provided to De Reynoso.” (FAC ¶ 19.) Although Plaintiff has not alleged the exact date of the oral representations, Plaintiff has provided sufficient detail that the representations were made prior to Plaintiff providing services to De Reynoso. Plaintiff also notes that the representations occurred before February 2010. Accordingly, Plaintiff has alleged sufficient specificity regarding how and when the representations were made.

In the demurrer, Defendants raise several factual arguments that are unpersuasive at the pleading stage. (Dem. 7-9.) Defendants point out that the written agreements attached to the FAC post-date the delivery of much of the medical services. However, such exhibits do not necessarily contradict the allegation that Defendants made false representations orally prior to Plaintiff rendering services to De Reynoso. Defendants claim that Plaintiff “would not be entitled to $487,487.00 [in damages] under a fraud theory simply because it chose to bill that amount: damages for fraud are generally limited to out-of-pocket losses.” (Dem. 8.) This argument is unpersuasive because the FAC alleges that Defendants induced Plaintiff to produce medical services and the amount of damages caused thereby is a factual question. Defendants contend that something more than proof of nonperformance of a promise is required to show fraudulent intent. (Dem. 8:26-28.) Plaintiff alleges sufficient factual circumstances regarding the alleged fraud at this stage of the proceedings. (FAC ¶¶ 19-24.)

The demurrer to the first cause of action is OVERRULED.

Second and Third Causes of Action – Breach of Written Contract, Breach of Oral Contract

To state a cause of action for breach of contract, Plaintiffs must allege (1) the existence of a contract; (2) plaintiffs’ performance or excuse for nonperformance; (3) defendants’ breach (or anticipatory breach); and (4) resulting damage. (Armstrong Petroleum Corp. v. Tri-Valley Oil & Gas Co (2004) 116 Cal. App. 4th 1375, 1391 n.6.)

Defendants contend that Plaintiff has not pleaded that De Reynoso was a party to the written contract. In sustaining the demurrer to the original complaint on this basis, the court noted that the patient’s name was redacted from the contract attached as Exhibit A to the original complaint. The FAC attaches unredacted versions of the agreements showing that Friedman signed the agreements as attorney for De Reynoso (the patient.) “The client as principal is bound by the acts of the attorney-agent within the scope of his actual authority (express or implied), or his apparent, or ostensible, authority.” (Yanchor v. Kagan (1971) 22 Cal.App.3d 544, 549.) Therefore, the FAC sufficiently alleges that De Reynoso is bound by the written contract.

Defendants contend that the written contract fails to include the material term of price of goods and that it is illusory because Plaintiff had unrestrained discretion to determine the price. However, the contract states that Friedman would assume liability for services to be paid in full “based on the billed charges provided by [Plaintiff].” (FAC Exh. A, B.) Thus, the FAC adequately alleges a meeting of the minds that Defendants agreed to pay Plaintiff its full billed charges. Defendants cite no authorities suggesting that more detail regarding the price of medical services or the implied limitations of Plaintiff’s discretion to vary the price is required, at least at the pleading stage. (See Dem 9-10; see Badie v. Bank of America (1998) 67 Cal.App.4th 779, 797 [“the fact that one of the parties reserves the power of varying the price or other performance is not fatal [i.e., does not render the contract illusory and unenforceable] if the exercise of this power is subject to prescribed or implied limitations”].)

Defendants contend that the agreement seems to lack consideration because most of the services were rendered before the written contract was executed. This argument fails as to the oral contract, because the complaint does not state exactly when the oral contract was made. The agreement attached as Exhibit B to the FAC was signed May 4, 2010, for services rendered between April 14, 2010 to May 5, 2010. Thus, the agreement was executed during the time in which Plaintiff continued to render services to De Reynoso. Therefore, the written contract was supported by at least some consideration on both sides (Defendants’ agreement to pay money in exchange for services rendered.)

Defendants contend that the statute of frauds bars the oral contract claim against Friedman since Friedman agreed to answer for medical goods and services provided to De Reynoso. “A special promise to answer for the debt, default, or miscarriage of another” falls within the statute of frauds. (Civ. Code § 1624(a)(2).) Here, the FAC alleges that Friedman individually agreed to pay for services rendered to De Reynoso. (FAC ¶¶ 27 and 34.) Thus, according to the complaint, the contract with Friedman was not a guaranty subject to the statute of frauds, but rather a direct obligation to pay money.

Based on the foregoing, the demurrer to the second and third causes of action is OVERRULED.

Fifth Cause of Action – Equitable Lien

“A promise to pay a debt out of a particular fund, without more, will not create an equitable lien on that fund.” (Farmers Ins. Exchange v. Zerin (1997) 53 Cal.App.4th 445, 454.) “However, even a mere promise to pay from a specific fund may suffice to create an equitable lien if considerations of detrimental reliance or unjust enrichment are implicated.” (Ibid.) ““The rationale of the rule permitting recovery on a theory of equitable lien is essentially this: that it would be inequitable and unjust to withhold from those persons who have by their labor and materials enhanced the value of the property the loan fund [ sic] which constituted a material inducement to them in supplying such labor and materials and upon which they relied for reimbursement.” (Id. at 455.)

In sustaining the demurrer to this cause of action in the original complaint, the court stated the following: “Insofar as Plaintiff attempts to allege detrimental reliance based on fraud, Plaintiff has not pleaded fraud with sufficient specificity.” As discussed above, Plaintiff has now alleged sufficient facts in support of the fraud claim. Pursuant to Zerin, supra, Plaintiff may maintain a cause of action for equitable lien based on allegations that Defendants represented that Plaintiff would be paid from funds obtained in connection with the personal injury lawsuit and Plaintiff detrimentally relied on that representation. Plaintiff has adequately alleged detrimental reliance. (FAC ¶¶ 48, 52.)

The demurrer to the fifth cause of action is OVERRULED.

Sixth Cause of Action – Conversion

To state a cause of action for conversion, plaintiff must allege (1) ownership or right to possession of personal property; (2) defendant’s disposition of the property inconsistent with plaintiff’s rights; and (3) resulting damages. (Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 119.) “A mere contractual right of payment, without more, will not suffice” to state a cause of action for conversion. (See Farmers Ins. Exchange v. Zerin (1997) 53 Cal.App.4th 445, 451.)

In sustaining the demurrer to this cause of action in the original complaint, the court stated the following: “Here, because Plaintiff has not alleged an equitable lien or other non-contractual right of possession, the conversion claim merely restates Plaintiff’s breach of contract allegations.” As discussed above for the fifth cause of action, Plaintiff has now alleged a basis for equitable lien. Accordingly, the demurrer to the sixth cause of action also fails. The demurrer to the sixth cause of action is OVERRULED.

Seventh Cause of Action – Unfair Competition

Defendant contends that the UCL claim fails because Plaintiffs have not alleged unlawful, fraudulent, or unfair conduct. Section 17200 broadly defines unfair competition as “any unlawful, unfair or fraudulent act or practice.” Each ground for the action operates in the alternative and only one of the three prongs need be plead to establish a cause of action. (Cel-Tech Communications v. Los Angeles Cellular Tel. Co. (1999) 20 Cal.4th 163.) 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.)

This cause of action appears to be based on Plaintiff’s fraud allegations. (FAC ¶¶ 68-81.) For the reasons stated above, Plaintiff has adequately alleged fraudulent conduct pursuant to the UCL.

The demurrer to the seventh cause of action is OVERRULED.

Eighth, Ninth, Tenth, and Twelfth Causes of Action – Common Counts (Unjust Enrichment, Money Had and Received, Goods and Services Rendered, and Quantum Meruit)

“[A] common count, by long continued practice is not subject to attack by general demurrer or by a special demurrer for uncertainty.” (Auckland v. Conlin (1928) 203 Cal. 776, 778.) “It is the established law of California that, if plaintiff is not entitled to recover under one count in a complaint wherein all the facts upon which his demand is based are specifically pleaded, it is proper to sustain a demurrer to a common count set forth in the complaint, the recovery under which is obviously based on the set of facts specifically pleaded in the other count.” (Hays v. Temple (1937) 23 Cal.App.2d 690, 695.)

The common counts are based on the breach of contract allegations discussed above. As Plaintiff has pleaded a contract claim against both Defendants, the common counts are not subject to general or special demurrer. (Auckland, supra.)

On the merits, the gravamen of the common counts is that De Reynoso received medical goods and services from Plaintiff at the request for De Reynoso and Friedman and that Defendants would pay for the same at their full billed amount.. Defendants have not compensated Plaintiff for those goods and services. (FAC ¶¶ 83-87.) Such allegations support all four common counts pleaded. Contrary to Defendants’ assertion, the common counts can be asserted against Friedman even if he did not receive the services himself. (Maglica v. Maglica (1998) 66 Cal. App. 4th 442, 449-50 [elements of quantum meruit only require that plaintiff perform the services at the defendant’s request].)

The demurrer to the eighth, ninth, tenth, and twelfth causes of action is OVERRULED.

Eleventh Cause of Action – Promissory Estoppel

The elements of promissory estoppel are: (1) a promise; (2) which the promisor should reasonably expect to induce action or forbearance; (3) of a definite and substantial character; (4) on the part of the promisee; (5) induces such action or forbearance; and (6) injustice can be avoided only by enforcement of the promise. (Lange v. Tig Ins. Co. (1998) 68 Cal. App. 4th 1179, 1185.)

Defendants contend that Plaintiff has not pleaded detrimental reliance because most of the goods and services were already rendered at the time the written contract was executed. As discussed above, the agreement attached as Exhibit B to the FAC was signed May 4, 2010, for services rendered between April 14, 2010 to May 5, 2010. Thus, some services were apparently rendered after the written agreement was signed. Moreover, the complaint alleges that the promise was made orally and in writing. Therefore, because Plaintiff has otherwise alleged detrimental reliance based on the oral promises to pay for services (FAC ¶ 97), the demurrer raises factual questions and is unpersuasive.

The demurrer to the eleventh cause of action is OVERRULED.

Uncertainty

Demurrers for uncertainty are strictly construed, because discovery can be used for clarification, and apply where defendants cannot reasonably determine what issues or claims are stated. (Khoury v. Maly’s of Cal., Inc. (1993) 14 Cal.App.4th 612, 616.) Defendants fail to show that the complaint is so uncertain that they cannot determine what issues are stated.

Defendants contend that the complaint is uncertain because “it appears” that the agreements with Friedman postdated the medical services obtained by De Reynoso. The agreement attached as Exhibit B to the FAC was signed May 4, 2010, for services rendered between April 14, 2010 to May 5, 2010. Thus, the agreement was executed during the time in which Plaintiff continued to render services to De Reynoso. The FAC now alleges another agreement executed on April 19, 2010 for services rendered in February and March 2010. (FAC Exh. A.) However, Defendants fail to show that there is anything improper or uncertain about this type of agreement, whereby Friedman assumed liability for services already rendered.

The demurrer for uncertainty is OVERRULED.

Motion to Strike

Punitive Damages

Defendants contend that Plaintiff has not pleaded sufficient facts to support a prayer for punitive damages. Punitive damages are available in noncontract cases where the defendant is guilty of “oppression, fraud, or malice.” (Civil Code § 3294(a).) “Oppression” means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights. C.C. § 3294(c)(2). “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 for the rights or safety of others. C.C. § 3294(c)(1). 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 prayer for punitive damages is based on the fraud allegations. For the reasons stated above, Plaintiff has pleaded fraud with sufficient specificity.

The motion to strike is DENIED.

Restitution

Restitution may be awarded where the defendant obtained a benefit from the plaintiff by fraud, duress, conversion, or similar conduct.” (McBride v. Boughton (2004) 123 Cal.App.4th 379, 388.) Restitution is a synonym for unjust enrichment, which is not a cognizable theory, but instead a general principal related to other claims and remedies. (Melchior v. New Line Productions, Inc. (2003) 106 Cal. App. 4th 779, 794.)

Defendants contend that Friedman did not obtain from Plaintiff any money or other goods capable of being restored. However, as discussed above for the common counts, the prayer for restitution is adequately supported by allegations that De Reynoso received medical goods and services from Plaintiff at the request of De Reynoso and Friedman. Therefore, Friedman obtained a benefit by virtue of the fact that he requested the services.

The motion to strike is DENIED.