2009-00064137-CU-CO

Dalvir S Brar vs. Darrell J Dettling Living Trust

Nature of Proceeding: Hearing on Demurrer to Second Amended Cross-Complaint

Filed By: DeSouza, Jacqueline

*** If oral argument is requested, the parties are directed to notify the clerk and
opposing counsel at the time of the request which issues/causes of action will
be addressed at the hearing. Counsel are reminded that pursuant to Local
Rules, only limited oral argument is permitted on law and motion matters. ***

The demurrer of Cross-Defendants Nick Shah, Sinal Shah and Sonare Corporation, Inc. (collectively “Cross-Defendants”) to the second amended cross-complaint
(“SACC”) of Plaintiffs, Cross-Defendants and Cross-Complainants Baljit S. Brar and
Brar H.P. Management Group, Inc. (collectively “Cross-Complainants”) is SUSTAINED
as follows:

Factual/Procedural Background

This case presents a multi-party business dispute involving a Mountain Mike’s Pizza
franchise. The parties include the owners of the real estate in which the franchise has
operated (the “lessors”), the original lessees/franchisees (Cross-Defendants), and
Cross-Complainants herein, who are among the parties who allegedly purchased the
franchise from Cross-Defendants and obtained an assignment of the lease. At the
center of the case are allegations that water intrusion at the premises has allowed
toxic mold to flourish and has prevented Cross-Complainants from operating the
franchise.

The operative first amended complaint contains Cross-Complainants’ (who are also
plaintiffs) causes of action against the lessors and the lessors’ property managers on
the theory that the latter were required to repair the premises and remediate the water
damage. The lessors cross-complained against Cross-Defendants and Cross-
Complaints herein on the theory that they were liable for unpaid rent. In turn, Cross-
Defendants filed their own cross-complaint against Cross-Complainants on grounds
that Cross-Complainants had not complied with the terms of the note and security
agreement executed when Cross-Complainants received the franchise and lease.
Finally, Cross-Complainants cross-complained against Cross-Defendants on grounds
that the latter misrepresented the condition of the premises and misrepresented that
they and/or the lessors would remediate any water damage.

Cross-Complainants’ SACC contains causes of action breach of oral contract, breach
of written contract, fraud and deceit, negligent misrepresentation, breach of the implied
covenant of good faith and fair dealing, negligent interference with economic
relationship, and unfair competition. Cross-Defendants demur on grounds that the
allegations fail to state facts sufficient to state a valid cause of action.

Discussion

Preliminarily, the court notes Cross-Complainants’ lodgment of a proposed third
amended cross-complaint. No accompanying motion for leave to amend is before the
court, and the court thus declines to consider the proposed pleading. Cross-
Defendants are entitled to a ruling on their demurrer.

The court also observes at the outset its earlier direction for the parties to submit
supplemental briefing on the question whether the SACC can be construed to set up
an equitable estoppel to Cross-Defendants’ argument that statutes of limitations to bar
Cross-Complainants’ causes of action. After reviewing the supplemental briefs and
applicable legal authorities, the court concludes that Cross-Complainants’ allegations
cannot be construed to establish such an equitable estoppel.

th
The court in Lantzy v. Centex Homes (2003) 31 Cal.4 363, 483 recited the elements
of equitable estoppel to a statute-of-limitations defense as follows:

(1) [I]f one potentially liable for a construction defect represents, while the limitations period is still running, that all actionable damage has been or
will be repaired, thus making it unnecessary to sue, (2) the plaintiff
reasonably relies on this representation to refrain from bringing a timely
action, (3) the representation proves false after the limitations period has
expired, and (4) the plaintiff proceeds diligently once the truth is
discovered [citation], the defendant may be equitably estopped to assert
the statute of limitations as a defense to the action. (Brackets added;
citation omitted.)

Here, equitable estoppel does not apply because the allegations cannot be construed
to establish due diligence on Cross-Complainants’ part. Although the parties dispute
the point at which Cross-Complainants knew or should have know that Cross-
Defendants’ promises to repair were false, (see discussion below) Cross-
Complainants admit that they discovered the falsity no later than July 20, 2010. (See
SACC at 5:3-7.) Cross-Complainants, however, did not file their original cross-
complaint against Cross-Defendants until April 20, 2011-nine months later. Cross-
Complainants do not offer any allegations explaining the reason(s) for this substantial
delay. As a consequence, the court will not overrule any demurrer on grounds of
equitable estoppel to an applicable statute of limitations.

The Sixth and Seventh Causes of Action for Negligent Interference with
Economic Relationship and Unfair Competition

The demurrers are SUSTAINED without leave to amend. Cross-Complainants have
withdrawn these causes of action, which the court construes as Cross-Complainants’
concessions that the causes of action are defective and cannot be cured through
further amendment.

The First Cause of Action for Breach of Oral Contract

The demurrer is SUSTAINED with leave to amend.

Cross-Defendants argue that the first cause of action is time-barred given the two-year
statute of limitations at CCP § 339(1). As noted above, Cross-Complainants did not
file their original cross-complaint until April 20, 2011. Characterizing the SACC as
stating breaches of contract in 2005 and 2006, Cross-Defendants argue that the first
cause of action is time-barred. (See Church v. Jamison (2006) 143 Cal.App.4th 1568,
1582-1583 [breach of contract cause of action accrues at the time of breach].)

Cross-Complainants counter based on a number of exceptions to the statute-of-
limitations defense. Among the exceptions cited is the “discovery rule,” which
postpones accrual of a cause of action until the plaintiff suspects or should suspect the
cause of action. (See April Enterprises, Inc. v. KTTV (1983) 147 Cal.App.3d 805, 828-
832 [applying discovery rule to breach of contract cause of action].)

Cross-Complainants appear to have identified two sets of contractual promises
supporting their first cause of action. First, they allege that Cross-Defendants
breached the alleged oral contract by delivering premises and a franchise that were
not in the good condition Cross-Defendants represented. The representations in
question allegedly were:

(a) that the Mountain Mike’s Pizza’s franchise rights were in good
standing;

(b) that the equipment was in excellent condition and operable to
effectively deliver and serve the food and beverage items associated with
operating a Mountain Mike’s pizza restaurant;

(c) that the property was in excellent condition without any material
defects because it was newly refurbished in a collaborative effort with the
Defendants;

(d) that the Defendant Owners were trustworthy, diligent, and reliable
Owners-lessors because the Cross-Defendants had collaborated with
them to renovate the entire property to make it suitable for a pizza
franchise because, on information and belief, it was previously a bank;

(e) that the property’s location supported the operation of a pizza
restaurant [meeting all applicable statutory and local requirements];

(f) that the CAM charges reflected the reasonable costs levied by the
Owners to operate the business on the property; and

(g) that the lease terms supported the operation of a pizza restaurant
within the leased premises.

(SACC, ¶ 47.)

In their current state, the allegations disclose that Cross-Complainants knew or should
have known by approximately November 2005 that the premises and other property
were not in their represented condition, i.e., without material defects. By that time,
Cross-Defendants allegedly had informed Cross-Complainants that the water intrusion
in 2005 was “abnormal.” (SACC at 4:15-16.) Nonetheless, leaks allegedly continued
between November 2005 and 2009. (Id. at 4:18-19; id. at ¶ 22 [“[After November
2005, t]he water continued to seep into the interior of the office space for several
months and continued to intrude into the north wall and ceiling of the property”].)
Thus, even if Cross-Complainants should not necessarily have understood when water
first intruded that the premises contained defects, their suspicions should have been
raised once leaks continued. Consequently, the discovery rule does not save the first
cause of action from demurrer.

In reaching this conclusion, the court is aware of Cross-complainants’ many
allegations that Cross-Defendants promised repairs would be made to prevent further
leaks. That Cross-Defendants allegedly made these promises, however, reinforces
the conclusion that Cross-Complainants knew or should have known early in their
leasehold that the premises contained defects, i.e., that repairs were needed.
Although under certain circumstances promises to repair can create an estoppel to a
statute-of-limitations defense, the presence of such promises undermines an argument
that a litigant did not know and should not have known that the premises were free of
defects. Accordingly, Cross-Complainants’ promise-to-repair allegations do not
support their belated-discovery arguments. (See CAMSI IV v. Hunter Technology
Corp. (1991) 230 Cal.App.3d 1525, 1536 [“A plaintiff whose complaint shows on its
face that his or her claim would be barred by the applicable orthodox statute of
limitations, and who intends to rely on the discovery rule to toll the orthodox limitation period, must specifically plead facts which show (1) the time and manner of discovery
and (2) the inability to have made earlier discovery despite reasonable diligence”]
[internal quotation marks and citations omitted].)

Nor is the court persuaded that the “continuing violation doctrine” assists Cross-
Complainants in overcoming application of the two-year statute of limitations to the
promises set forth in paragraph 47 of the SACC. That doctrine provides that, where a
defendant commits a series of continuing wrongs, the cause of action accrues upon
completion of the most recent wrong. Here, however, there was only one wrong, viz.,
Cross-Defendants’ delivery of premises and a franchise in conditions different than
those represented. (Cf. Armstrong Petroleum Corp. v. Tri-Valley Oil & Gas Co. (2004)
116 Cal.App.4th 1375, 1389 [distinguishing between continuing breach and a single
breach resulting in a continuous impact].)

Next, Cross-Complainants cite the “continuous accrual doctrine” as an exception to the
statute of limitations. That doctrine applies to actions involving recurring obligations,
such as a tenant’s monthly obligation to pay rent. (See Aryeh v. Canon Business
Solutions, Inc. (2013) 55 Cal.4th 1185, 1200 [collecting authorities].) Here, however,
Cross-Defendants are not alleged to have any recurring obligations. Although Cross-
Complainants were required to pay monthly rent, Cross-Defendants were only required
to deliver the premises at the outset-a one-time promise to perform. Thus, the
continuing accrual doctrine does not apply.

Cross-Complainants next cite fraudulent concealment as a basis upon which to toll the
statute of limitations. “The doctrine of fraudulent concealment tolls the statute of
limitations where a defendant, through deceptive conduct, has caused a claim to grow
stale.” (Aryeh , 55 Cal.4th at 1192.) Even if the allegations in the SACC can be
construed to establish a fraudulent concealment initially, the fact that the premises
allowed for ongoing water intrusion was evident by late 2005. Thus, assuming the two
-year statute was tolled for a short period after the parties’ entered into the contract, it
did not toll the period long enough to overcome Cross-Defendants’ statute-of-
limitations defense.

Finally, Cross-Complainants attempt to overcome the two-year statute of limitations by
reference to equitable tolling. As Cross-Complainants observe, that doctrine tolls a
limitations period where a plaintiff has pursued one among several remedies, and thus
the statute of limitations’ notice function has been served. (See Opp at 12:7-10
[citation omitted].) Thus, for example, where a plaintiff pursues an administrative
remedy prior to filing a civil lawsuit in court, equitable tolling can extend the period in
which to bring the lawsuit. (See McDonald v. Antelope Valley Community College
Dist. (2008) 45 Cal.4th 88, 101.)

In Cross-Complainants’ view, the two-year statute of limitations was equitably tolled
when Cross-Defendants filed their cross-complaint against Cross-Complainants in the
instant case. Absent an authority holding that equitable tolling has been extended to
such a circumstance, the court rejects Cross-Complainants’ argument.

The second set of promises upon which Cross-Complainants predicate their first cause
of action appear in paragraph 48 of the SACC. That paragraph reads:

From 2006 to 2010, Cross-Defendants continuously and orally
represented that the Owners and Agents would rectify the water seepage
issues, that the mold burdening the property was not toxic which
prompted Cross-Complainants to retain experts in November 2009, and
subsequently, that any issues relating to the toxic mold would be fully
remediated and resolved by the Owners and/or Agents pursuant to their
original lease contracted that inured to the benefit of Cross-
Complainants.

These promises, however, are not supported by legal consideration. Rather, they are
representations that the lessors would cure any pre-existing defect in the premises
which could have amounted to a breach of the contract. Because the allegations in
paragraph 48 of the SACC do not themselves support a breach of contract cause of
action, they do not enable Cross-Complainants to overcome Cross-Defendants’
demurrer.

The court grants Cross-Complainants leave to amend.

The Second and Fifth Causes of Action for Breach of Written Contract and
Breach of the Implied Covenant of Good Faith and Fair Dealing

The demurrers are SUSTAINED with leave to amend.

The four-year statute of limitations at CCP § 337(1) governs breaches of written
contracts. Cross-Defendants reason that, because Cross-Complainants filed the
original cross-complaint on April 20, 2011, and because breach occurred in 2005 or
2006, the second cause of action is time-barred. (See Church, supra, 143 Cal.App.4th
at 1582-1583 [breach of contract cause of action accrues at the time of breach].)

First, Cross-Complainants predicate their breach of written contract cause of action
upon allegations that, in the purchase agreement entered into on September 1, 2005,
Cross-Defendants promised that “everything is in working order at the time of
closing.” (SACC, ¶ 52.) For reasons stated above, however, the allegations disclose
that Cross-Complainants knew or should have known that everything was not in
working order by late 2005. Given the applicable four-year statute of limitations, Cross
-Complainants had until approximately late 2009 to bring their breach of written
contract cause of action against Cross-Defendants. Having failed to do so, the
allegations based on the 2005 purchase agreement are time-barred.

With respect to the fifth cause of action for breach of the implied covenant of good faith
and fair dealing, Cross-Complainants take the position that it rises and falls along with
the second cause of action for breach of written contract. Hence, the court concludes
that because the second cause of action is time-barred, the fifth cause of action is time
-barred as well.

Next, Cross-Complainants allege that Cross-Defendants breached the written
Assignment of Lease because the lease contains the lessors’ promise to “repair and
maintain the structural premises of the Building, including the exterior walls and
roof.” (SACC, ¶ 54 [brackets in original].) As currently alleged, however, the subject
promise is attributable to the lessors, not Cross-Defendants. Accordingly, the
Assignment of Lease does not support a breach of written contract cause of action
against Cross-Defendants, and the demurrer must be sustained.

The court grants Cross-Complainants leave to amend. The Third and Fourth Causes of Action for “Actual Fraud & Deceit” and
”Negligent Misrepresentation of Fact”

The demurrers are SUSTAINED with leave to amend.

Fraud and negligent misrepresentation are governed by the three-year statute of
limitations at CCP § 338(d). As with other torts, accrual of these causes of action may
be delayed where a plaintiff neither knows nor reasonably suspects the factual
predicates. (See Jane Doe v. Roman Catholic Bishop of Sacramento (App. 3 Dist.
th
2010) 189 Cal.App.4 1423, 1431.) However, once plaintiffs are aware of facts that
should lead them to inquire further, the causes of action accrue. (See id.) Where
plaintiffs fail to undertake such an inquiry once they are aware of an injury, the
discovery rule will not assist them even if a reasonable inquiry would not have
disclosed the cause of action. (Id. [citation omitted].) In other words, plaintiffs who
cannot demonstrate diligence in investigating cannot make recourse to the discovery
rule.

Cross-Complainants’ allege that the misrepresentations and concealment occurred in
2005. (SACC, ¶ 63.) They also allege that they suffered continual water intrusion at
the premises between 2005 and 2009. (Id. at 9:18-22; id., ¶¶ 22, 48.) Nonetheless,
they argue that the subject causes of action did not accrue until 2009, when they
retained experts who performed tests revealing that the water intrusion was the result
of long-standing problem of which Cross-Defendants must have been aware. (See id.,
¶ 42.)

Cross-Complainants allegations are insufficient to demonstrate that the discovery rule
delayed accrual until 2009. The only explanation Cross-Complainants offer for their
failure to investigate Cross-Defendants’ alleged misrepresentations is that Cross-
Defendants promised repairs would be made. Although such promises might have
supported an equitable estoppel defense if Cross-Complainants had diligently filed
their cross-complaint, they do not support a defense based on the discovery rule.

The court grants Cross-Complainants leave to amend.

Because the court sustains Cross-Defendants’ demurrers based on statutes of
limitations, it does not reach the parties’ other arguments in support of or in opposition
to the demurrers.

Judicial Notice

Cross-Defendants’ request for judicial notice of court documents is UNOPPOSED and
GRANTED.

Conclusion

No later than April 18, 2014, and only to the extent leave to amend is granted, Cross-
Complainants may file and serve a third-amended cross-complaint (“TACC”); Cross-
Defendants to file and serve their responsive pleading(s) within 10 days thereafter, 15
days if the TACC is served by mail. (Although not required by any statute or rule of
court, Cross-Complainants are requested to attach a copy of the instant minute order
to the TACC to facilitate the filing of the pleading.)

Dalvir S Brar vs. Darrell J Dettling Living Trust

Nature of Proceeding: Motion for Judgment on the Pleadings

Filed By: Disharoon, Steven R.

*** If oral argument is requested, the parties are directed to notify the clerk and
opposing counsel at the time of the request which causes of action will be
addressed at the hearing. Counsel are reminded that pursuant to Local Rules,
only limited oral argument is permitted on law and motion matters. ***

Defendants Darrell J. Dettling Living Trust, et al.’s motion for judgment on the
pleadings as to plaintiff’s First Amended Complaint (“1AC”) is GRANTED with leave to
amend, as follows.

Opposing counsel is admonished because the opposition fails to comply with CRC
Rule 3.1110(b)(3)-(4) and Rule 3.1113(d), (e) and (f).

Opposing counsel is admonished because the opposition was not timely filed and not
served in compliance with Code of Civil Procedure §1005(b). It was, however,
considered by the Court.

Moving counsel is admonished because the notice of motion fails to provide the
correct address for Dept. 54.

Although the notice of motion provided notice of the Court’s tentative ruling system as
required by Local Rule 1.06(D), the notice does not comply with that rule. Moving
counsel is directed to review the Local Rules, effective 1/1/2013.

This action was commenced on 11/16/2009 and arises out of plaintiff’s September
2005 assumption of a lease for commercial property wherein he operated a Mountain
Mike’s Pizza franchise. The 1AC alleges that as early as October 2005, plaintiff began
experiencing water intrusion into the leased premises and resulting damage to both his
personal property and the business itself, including the formation of “toxic mold.” (1AC,
¶¶37-42.) Plaintiff generally alleges that despite actual knowledge of water leaks prior
to September 2005 and despite his numerous complaints thereafter, defendants failed
to repair the property and remove the toxic mold, culminating in plaintiff vacating the
premises on 8/23/2010.

The 1AC now purports to assert causes of action (“COA”) for breach of contract,
negligent repair, tortious breach of implied covenant of good faith and fair dealing;
wrongful eviction, negligent interference with economic relationship, unfair competition,
private nuisance and declaratory relief.

Defendants contend they are entitled to judgment on the 1AC for several reasons but
primarily because each COA is barred by the applicable statutes of limitations. More
specifically, defendants point out that the 1AC admits plaintiff was aware of the alleged
water intrusion into the leased premises and began experiencing problems related
thereto as early as October 2005 but because no COA asserted has a statute of
limitations greater than four (4) years, the commencement of this action on 11/16/2009 was patently untimely.

Additionally, with respect to the contract COA which consists of three (3) distinct
claims, defendants argue they are uncertain, not pled with the specificity required by
Construction Protective Services, Inc. v. TIG Specialty Insurance Co. (2002) 29
Cal.4th 189, and the statute of frauds. As to the breach of implied covenant COA,
defendants insist it is uncertain, appears to allege defendants had substantive duties
far beyond what was expressly provided by the written contract, and fails to identify
with specificity which contractual provision(s) was not followed in good faith.
Defendants maintain that the wrongful eviction COA is uncertain, it sounds more like a
claim for breach of the covenant of quiet enjoyment and constructive eviction, and
plaintiff fails to plead not only that he vacated the premises “within a reasonable time
after the wrongful act of the landlord” but also that the latter acted with malice or bad
faith. According to defendants, the negligent interference COA cannot under California
law be based on the facts currently alleged since plaintiff and defendants were not
“competitors” and since defendants’ mere failure to adequately repair water leaks is
not the type of conduct which is covered by this tort theory; plaintiff has failed to
sufficiently plead not only that he is the third party beneficiary of any contract but also
that defendants owed any duty of care to plaintiff prior to his assumption of the lease in
September 2005. Finally, defendants contend that the unfair competition COA is
deficient inasmuch as it is fundamentally premised on the same allegations as the
breach of contract COA, it fails to identify any conduct which is “unlawful, unfair or
fraudulent” within the meaning of Business & Professions Code §17200 et seq., and
plaintiff fails to plead a remedy permitted under §17200 et seq.

Plaintiff opposes the motion, arguing that his COA are not barred by the statutes of
limitations because “Defendants either promised that repairs had fully rectified or
would fully rectify any construction defects in the premises” and “In actual and
reasonable reliance on these representations, Plaintiff did not commence a lawsuit but
continued to perform his obligations by making monthly payments” until late 2009 and
early 2010, when plaintiff’s “experts…discovered longstanding constructions defects
that led to the proliferation of toxic mold, which caused Plaintiff to make a final demand
to repair and remediate the issues.” When defendants refused, Plaintiff stopped
making payments and closed his business. (Oppos., p.3:1-11.) More specifically,
plaintiff insists that under several equitable theories including (1) the continuing
violation doctrine, (2) the continuous accrual theory, (3) fraudulent concealment and
(4) equitable estoppel, his COA against defendants are not barred by the applicable
statutes of limitations. (Id., at p.4:18-27.) The opposition next discusses the continuing
violation doctrine in connection with the three (3) claims constituting the breach of
contract COA, the breach of covenant of good faith COA and the wrongful eviction
COA. (Id., at p.5:1-p.11:8.) Plaintiff includes alternative arguments purporting to show
why his COA should be deemed timely under the continuous accrual doctrine,
fraudulent concealment and/or equitable estoppel.

At the outset, the Court notes that plaintiff’s untimely opposition failed to address any
grounds advanced by defendants’ moving papers other than the statute of limitations.
The Court construes plaintiff’s failure to address these other arguments as a
concession of their merits and therefore, the motion for judgment on the pleadings is
granted on the non-statute of limitations grounds.

Furthermore, while it remains unclear whether under the facts of this case plaintiff can
successfully circumvent defendants’ assertion of the statute of limitations defense pursuant to any of the four (4) theories/doctrines identified in the untimely opposition,
the 1AC simply does not currently allege facts sufficient to enable plaintiff to invoke
any of these theories/doctrines in response to defendants’ statute of limitations
challenge. It is well established in California that when a complaint shows on its face
that a pleaded COA is barred by the statute of limitations, the plaintiff must plead facts
which show an excuse, tolling or other basis for avoiding the statutory bar. (In re Reno
(2012) 55 Cal.4th 428, 511 (citing Spray, Gould & Bowers v. Associated International
Insurance Co. (1999) 71 Cal.App.4th 1260, 1266, fn.4).) Since the 1AC does not
currently state facts which support the invocation of the continuing violation doctrine,
the continuous accrual theory, fraudulent concealment and/or equitable estoppel, the
Court must agree with defendants that the face of the pleading fails to state any valid
COA against them. Thus, the motion for judgment on the pleadings is therefore
granted on the statute of limitations ground as well.

As this is defendants’ first challenge to the complaint, plaintiff is granted leave to
amend. He may file and serve an amended complaint no later than 4/18/2014.
Although not required by court rule or statute, plaintiff is directed to present a
copy of this order when the amended complaint is presented for filing.

If any defendant intends to demur to the amended complaint or move to strike, they
shall determine if any other defendant who has appeared in this action also intends to
demur or move to strike. If so, all such defendants shall coordinate a single hearing
date for the demurrers and motions to strike. Additionally, a copy of the amended
complaint shall be included with the moving papers.

This minute order is effective immediately. No formal order or other notice is required.
(Code Civ. Proc. §1019.5; CRC Rule 3.1312.)