Case Number: EC062507    Hearing Date: November 07, 2014    Dept: B

NOTICE: Department B will be dark on November 7, 2014. Please review the following tentative ruling. If you wish to have oral argument, please contact opposing counsel and agree upon one of the following dates for argument: November 21 or December 5. Then, please send an email to lmcfarlane@lacourt.org stating your case number, the agreed upon date for argument, and which party will give notice. The email must be received by 4:30 p.m. on November 7, 2014, or the Court’s tentative ruling will be the ruling and order of the Court. You may also send an email if you submit to the tentative ruling.

TENTATIVE RULING:

Demurrer (2)

Case Management Conference

The Complaint alleges that: Plaintiff is in the business of importing and distributing rice. The Plaintiff ordered rice from the Defendants. The Defendants breached the agreement by delivering rice of an inferior quality.

The causes of action in the First Amended Complaint are for:
1) Breach of Oral Contract
2) Breach of Covenant of Good Faith and Fair Dealing – Tort
3) Fraud
4) Fraudulent Concealment
5) Negligent Misrepresentation
6) Negligence

This hearing concerns the demurrers for Defendant Global Food Group, Inc and Defendant Khurram Sheikh directed at the First Amended Complaint.

1. Defendant, Global Food Group, Inc.

The Defendant argues that the second and sixth causes of action lack sufficient facts.

a. Second Cause of Action for Breach of Implied Covenant of Good Faith and Fair Dealing

The Defendant argues that this cause of action does not Plaintiff sufficient facts because it is based on the same breach pleaded in the cause of action for breach of contract.

In order to plead any action for breach of the implied covenant of good faith and fair dealing, the plaintiff must allege the existence of a contractual relationship between the parties because the covenant is an implied term in the contract. Smith v. City and County of San Francisco (1990) 225 Cal. App. 3d 38, 49. The breach of the implied covenant of good faith and fair dealing involves something beyond a breach of a contractual duty. Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal. App. 3d 1371, 1394. If the allegations supporting the breach of the implied covenant do not go beyond the statement of a mere contract breach and, relying on the same alleged acts, simply seek the same damages or other relief already claimed in a companion contract cause of action, they may be disregarded as superfluous as no additional claim is actually stated. Id. at 1395.

The Plaintiff alleges in paragraph 28 of the first cause of action for breach of oral contract that the Defendant breached the oral contract by failing to provide quality rice for the Plaintiff’s Sahel brand and by failing to provide any rice for the Plaintiff’s Darya brand. In paragraph 31 of the second cause of action for breach of the implied covenant, the Plaintiff pleads that the Defendant breached the implied covenant by failing to provide quality rice for the Plaintiff’s Sahel brand and by failing to provide any rice for the Plaintiff’s Darya brand. The allegations supporting the breach of the implied covenant are identical to the allegations supporting the breach of oral contract. The allegations do not go beyond the statement of a mere contract breach and rely on the same alleged facts. Under California law, the allegations in the second cause of action for breach of the implied covenant may be disregarded as superfluous as no additional claim is actually stated.

Finally, the Plaintiff seeks punitive damages in the second cause of action for breach of the implied covenant. California law authorizes the award of tort damages such as punitive damages for the breaches of the covenant of good faith and fair dealing only in insurance contracts. Erlich v. Menezes (1999) 21 Cal. 4th 543, 551. This case does not involve an insurance contract.

Accordingly, the Court sustains the demurrer to the second cause of action.

The Plaintiff states in its opposition that it will stipulate to dismiss the second cause of action. Accordingly, the Court does not grant leave to amend.

b. Sixth Cause of Action for Negligence

The Defendant argues that the Plaintiff cannot base a tort claim on the breach of a contract. A review of the sixth cause of action reveals that it pleads in paragraph 65 that the Defendants failed to exercise reasonable care in honoring their obligations under the contract. The Plaintiff’s negligence claim is based on the claim that the Defendants acted negligently by failing to perform contractual obligations.

Conduct amounting to a breach of contract becomes tortious only when it also violates a duty independent of the contract arising from principles of tort law. Erlich v. Menezes (1999) 21 Cal. 4th 543, 551. An omission to perform a contract obligation is never a tort, unless that omission is also an omission of a legal duty. Id. Examples of cases permitting tort damages in contract cases are the following:

1) breaches of contractual duties that cause physical injuries;
2) breaches of the covenant of good faith and fair dealing in insurance contracts;
3) wrongful discharge in violation of public policy;
4) the fraudulent inducement of a contract.
Id. at 551-552.

This case is based on the claim that the Defendant delivered low quality rice under an oral agreement with the Plaintiff. The Plaintiff’s negligence claim does not identify any breach of a duty independent of the contract arising from principles of tort law. Since there is no allegation that the Defendants breached a tort duty arising independent of the contract, the cause of action lacks sufficient facts.

Accordingly, the Court sustains the demurrer to the sixth cause of action.

Under California law, the Plaintiff must show in what manner the Plaintiff can amend its Complaint and how that amendment will change the legal effect of the pleading. Goodman v. Kennedy (1976) 18 Cal.3d 335, 349. The Plaintiff did not request leave to amend and did not offer any basis for finding that it can correct the identified defects by amendment. Accordingly, the Court does not grant leave to amend.

2. Defendant, Khurram Sheikh

The Defendant argues that each cause of action lacks sufficient facts to plead that he is liable for the acts of the other Defendant, Global Foods Group. The Plaintiff’s case is based on a contract it alleges in paragraph 7 that it entered into with Global Foods Group.

a. First Cause of Action for Breach of Oral Contract and Second Cause of Action for Breach of Covenant of Good Faith and Fair Dealing – Tort

The first two causes of action are based on the breach of a contract. As noted above, the contract is between the Plaintiff and the Defendant, Global Foods Group. There are no allegations identifying any basis to hold Khurram Sheikh liable for the breach of this contract.

On page 6 of its opposition, the Plaintiff states that it will stipulate to a dismissal of the first and second causes of action.

Accordingly, the Court sustains the demurrer to the first and second causes of action without leave to amend.

b. Third Cause of Action for Fraud, Fourth Cause of Action for Fraudulent Concealment, and Fifth Cause of Action for Negligent Misrepresentation

The Defendant argues that there are insufficient allegations to plead a claim against him.

The third cause of action for fraud must include the following elements:

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.

The fourth cause of action for fraudulent concealment must include the following elements:

1) the defendant must have concealed or suppressed a material fact,
2) the defendant must have been under a duty to disclose the fact to the plaintiff,
3) the defendant must have intentionally concealed or suppressed the fact with the intent to defraud the plaintiff,
4) the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact, and
5) as a result of the concealment or suppression of the fact, the plaintiff must have sustained damage.
Lovejoy v. AT&T Corp. (2004) 119 Cal. App. 4th 151, 157-158.

The fifth cause of action for negligent misrepresentation must include the following elements:

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.

These causes of action are torts of deceit and the facts constituting each element must be alleged with particularity; the claims 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.

The Plaintiff claims in paragraph 39 of the third cause of action for fraud and in paragraph 62 of the fifth cause of action for negligent misrepresentation that Khurram Sheikh made false statements to provide quality rice to the Plaintiff to induce the Plaintiff into the agreement. The complaint must allege facts showing how, when, where, to whom, and by what means the representations were tendered. Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73. There are no allegations identify how, when, where, to whom, or by what means Khurram Sheikh made the false statements in the third and fifth causes of action. This is insufficient.

The Plaintiff claims in paragraph 54 of the fourth cause of action for fraudulent conveyance that the Defendants had a fiduciary duty to disclose all material facts regarding the contract. There are no particular allegations identifying any basis to find that the Plaintiff had a fiduciary relationship with the Defendant when the allegations in the pleadings reveal solely a contractual relationship under which the Defendants sold rice to the Plaintiff. This is insufficient.

Accordingly, the Court sustains the demurrers to the third, fourth, and fifth causes of action.

Under California law, the Plaintiff must show in what manner the Plaintiff can amend its Complaint and how that amendment will change the legal effect of the pleading. Goodman v. Kennedy (1976) 18 Cal.3d 335, 349. The Plaintiff did not request leave to amend and did not offer any basis for finding that it can correct the identified defects by amendment. Accordingly, the unless that Plaintiff offers a basis at the hearing for the Court to allow amendment, the Court will not grant leave to amend.

c. Sixth Cause of Action for Negligence

The Defendant argues that the Plaintiff cannot base a tort claim on the breach of a contract. A review of the sixth cause of action reveals that it pleads in paragraph 65 that the Defendants failed to exercise reasonable care in honoring their obligations under the contract. The Plaintiff’s negligence claim is based on the claim that the Defendants acted negligently by failing to perform contractual obligations.

Conduct amounting to a breach of contract becomes tortious only when it also violates a duty independent of the contract arising from principles of tort law. Erlich v. Menezes (1999) 21 Cal. 4th 543, 551. An omission to perform a contract obligation is never a tort, unless that omission is also an omission of a legal duty. Id. Examples of cases permitting tort damages in contract cases are the following:

1) breaches of contractual duties that cause physical injuries;
2) breaches of the covenant of good faith and fair dealing in insurance contracts;
3) wrongful discharge in violation of public policy;
4) the fraudulent inducement of a contract.
Id. at 551-552.

This case is based on the claim that the Defendant delivered low quality rice under an oral agreement with the Plaintiff. The Plaintiff’s negligence claim does not identify any breach of a duty independent of the contract arising from principles of tort law. Since there is no allegation that the Defendants breached a tort duty arising independent of the contract, the cause of action lacks sufficient facts.

Accordingly, the Court sustains the demurrer to the sixth cause of action.

Under California law, the Plaintiff must show in what manner the Plaintiff can amend its Complaint and how that amendment will change the legal effect of the pleading. Goodman v. Kennedy (1976) 18 Cal.3d 335, 349. The Plaintiff did not request leave to amend and did not offer any basis for finding that it can correct the identified defects by amendment. Accordingly, the Court does not grant leave to amend.