Case Name: Del Golfo Foods, Inc. v. Iguanas Burritozilla, Corp.
Case No.: 16CV301178

Plaintiff/cross-defendant Del Golfo Foods, Inc. (“Del Golfo”) demurs to the first amended cross-complaint (“FACC”) filed by defendant/cross-complainant Iguanas Burritozilla, Corp. dba Iguanas Restaurant (“Iguanas”) and moves to strike portions contained therein.

I. Factual and Procedural Background

This action arises out of a contractual business dispute. According to the allegations of the underlying first amended complaint (“FAC”), in 2014 Del Golfo and Iguanas entered into a business relationship pursuant to which Del Golfo would supply beef, poultry, fish and condiment products to Iguanas at their restaurants. (FAC, ¶ 9.) Upon delivery of the foregoing products, Del Golfo would provide Iguanas with an opportunity to inspect the items to its satisfaction and would then provide it with an itemized invoice for all of the delivered products, which Iguanas would sign. (Id.) Most, if not all, invoices provided a payment due date of ten days, and it was the initial standard practice for Iguanas to provide payment to Del Golfo within 10 to 21 days of acceptance of the products. (Id.)

Between June 2015 and November 2015, Del Golfo provided various items to Iguanas without incident to its restaurants in Saratoga, San Jose and Santa Clara. (FAC, ¶ 11.) Del Golfo continued to supply its products to Iguanas restaurants from December 2015 to February 2016, but Iguanas refused and continue to refuse to make payment on the invoices provided for these items. (Id., ¶ 12.) Consequently, Iguanas currently owes a pre-interest balance of $114,855 to Del Golfo. (Id.)

Based on the foregoing allegations, on December 5, 2017, Del Golfo filed the FAC asserting the following causes of action: (1) breach of contract; (2) breach of covenant of good faith and fair dealing; and (3) goods and services rendered.

Iguanas subsequently filed a cross-complaint on January 18, 2018, and then the operative FACC on March 2, 2018. According to the allegations of this pleading, beginning in December 2013, Jimmy Orozco (“Orozco”), CEO of Iguanas, was contacted by Del Golfo’s owner, Miguel Salinas (“Salinas”), regarding a potential business relationship between the parties. (FACC, ¶ 7.) The parties subsequently met to discuss the specific terms of such a relationship and during this meeting, as well as many other conversations that followed, Orozco explained that Iguanas prided itself on using only the highest quality ingredients, specifically Angus beef. (Id., ¶ 8.) During the first in –person meeting, Salinas was provided a menu for Iguanas, which prominently displayed the Angus beef mark next to the steak option. (Id., ¶ 9.) When Orozco asked if Del Golfo would be able to deliver Angus quality beef, Salinas agreed that Del Golfo could and would do so. (Id.)
Around February 11, 2014, Orozco had another conversation with Salinas in which he reiterated the need for Angus beef and requested samples of the product that Del Golfo would be delivering. (FACC, ¶ 10.) Salinas agreed and did in fact provide such samples, which Iguanas inspected for fat content, nerves, cut size and shape. (Id., ¶ 11.) It also marinated the steaks overnight and further inspected them after they were marinated to ensure that they met its exacting standards. (Id.) Orozco again spoke with Salinas and Iguanas agreed to use Del Golfo’s services with the condition and understanding that Del Golfo would be delivering the promised Angus beef for all beef lifter meat ordered by Iguanas. (Id., ¶ 12.) Del Golfo agreed and the parties arrived at an agreed price for said beef. (Id.)

In reliance on Del Golfo’s representations and the parties’ agreement, Iguanas began ordering beef from Del Golfo. (FACC, ¶ 14.) From August 2014 through January 2016, Del Golfo delivered thousands of pounds of beef lifter meat to Iguanas’ restaurants. (Id.) Of those thousands of pounds of beef lifter meat, less than approximately 5% was Angus beef. (Id.) Del Golfo would then invoice the deliveries to the corporate office but would omit any description of the quality of the beef provided. (Id., ¶ 15.) The price charged was consistent with Angus beef quality meat and, due to the omission, Iguanas had no reason to doubt that the beef received was Angus beef as promised. (Id., ¶ 16.) Iguanas alleges, on information and belief, that Del Golfo intentionally omitted the grade from its invoices to conceal the fact that it was selling below grade beef. (Id.)

In January 2016, Iguanas began investigating the beef delivery from Del Golfo and discovered that some of the meat delivered that month was not Angus quality. (FACC, ¶ 17.) After making this discovery, Iguanas stopped ordering from Del Golfo and switched suppliers. (Id., ¶ 18.) Iguanas subsequently met with Salinas to discuss the sub-grade deliveries and Salinas admitted that he had agreed that Del Golfo would deliver only Angus beef. (Id., ¶ 19.) A review of materials from Del Golfo’s suppliers, however, showed that Del Golfo only ever ordered “select” or “choice” graded beef and only received and delivered approximately 5% Angus beef to Iguanas. (Id.) As a result, Iguanas overpaid by at least $126,000 for the meat that it received, and also suffered damage to its business reputation. (Id., ¶ 20.)

Based on the foregoing allegations, Iguanas asserts the following claims against Del Golfo in the FACC: (1) fraud- intentional misrepresentation; (2) fraud- false promise; (3) fraud- negligent misrepresentation; (4) fraud- concealment; (5) breach of contract; (6) breach of the implied covenant of good faith and fair dealing; (7) common counts; and (8) violation of Business & Professions Code § 17200 et seq. On April 4, 2018, Del Golfo filed the instant demurrer to the FACC on the ground of failure to state facts sufficient to constitute a cause of action. (Code Civ. Proc., § 430.10, subd. (e).) Del Golfo also filed the motion to strike portions of the FACC. (Code Civ. Proc., §§ 435 and 436.) Iguanas opposes both motions.

II. Demurrer

With the instant motion, Del Golfo demurs to the FACC and each of the fraud claims asserted therein, i.e., the first through fourth causes of action, on the ground of failure to state facts sufficient to constitute a cause of action.

As an initial matter, Iguanas is correct that because Del Golfo has demurred to the FACC in its entirety but has not addressed any of the non-fraud causes of action, the demurrer to the operative pleading as a whole must be and is OVERRULED. (See Warrent v. Atchison, Topeka & Santa Fe Ry. Co. (1971) 19 Cal.App.3d 24, 36 [stating that if there are several causes of action in the complaint, a demurrer to the entire complaint may be overruled if any cause of action therein is properly stated].)

Turning then to the individual fraud claims, Del Golfo first asserts that the first cause of action for fraud based on intentional misrepresentation is deficient because the claim is not pleaded with the requisite specificity, nor are there sufficient facts pleaded which establish its intent to defraud Iguanas.
Generally, pleading a claim for fraud requires alleging the following essential elements: (1) misrepresentation (false representation, concealment, or nondisclosure); (2) knowledge of falsity (scienter); (3) intent to defraud (i.e., to induce reliance); (4) justifiable reliance; and (5) resulting damages. (Anderson v. Deloitte & Touche (1997) 56 Cal.App.4th 1468, 1474.) Fraud must be pleaded with specificity; this necessitates setting forth facts which “show how, when, where, to whom, and by what means the representations were tendered.” (Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73.) Thus, general and conclusory allegations will not suffice. (See West v. JP Morgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 792.) Courts enforce the specificity requirement in consideration of its two purposes. (Id. at 793.) The first purpose is to give notice to the defendant with sufficiently definite charges that the defendant can meet them. (Ibid.) The second is to permit a court to weed out meritless fraud claims on the basis of the pleadings; thus, the pleading should be sufficient to enable the court to determine whether, on the facts pleaded, there is any foundation, prima facie at least, for the charge of fraud. (Ibid.)
For a fraud claim predicated on an intentional misrepresentation in particular, a plaintiff must allege that “(1) the defendant made a false representation as to a past or existing material fact; (2) the defendant knew the representation was false at the time it was made; (3) in making the representation, the defendant intended to deceive the plaintiff; (4) the plaintiff justifiably relied on the representation; and (5) the plaintiff suffered resulting damages.” (West v. JPMorgan Chase Bank, supra, 214 Cal.App.4th at 792 [citation omitted].)
Here, Del Golfo first maintains that the facts are unclear as to whether it promised to deliver “only Angus beef” or beef that was simply “of Angus beef quality” and further, the FACC is problematic because it is silent with respect to how the term “Angus beef” is defined. Next, as set forth above, Del Golfo contends that this claim fails because Iguanas has not pleaded any facts which establish that it intended to defraud the company.
The Court finds neither of the foregoing arguments persuasive. First, with respect to Del Golfo’s assertion that no claim for intentional misrepresentation has been stated because the FACC is silent as to how “Angus beef” is defined, such a definition is not necessary in order for Iguanas to simply state a claim for misrepresentation. The basis of this claim is clear: Del Golfo purportedly represented that it would be providing a certain quality of beef but ultimately failed to do so. Whether or not the parties actually had the same understanding as to what was being agreed to such that a claim for intentional misrepresentation ultimately proves meritorious is a factual issue not appropriately resolved on demurrer. Moreover, if there is in fact any ambiguity regarding the term “Angus beef,” that can be cleared up by Del Golfo in the discovery process.
As for Del Golfo’s second argument, the element of intent to deceive is a fact and thus is sufficiently pleaded by the general averment that a defendant intended to defraud the plaintiff. (See, e.g., Hall v. Mitchell (1922) 9 Cal.App. 743; see also 5 Witkin, California Procedure (5th ed. 2008) Pleading, §§ 726, 728.) With Iguanas having made such an allegation here (see FACC, ¶¶ 22-28), this argument does not provide a basis upon which to sustain the demurrer. Thus, Del Golfo’s demurrer to the first cause of action on the ground of failure to state facts sufficient to constitute a cause of action is OVERRULED.
Next, Del Golfo contends that Iguanas’ second cause of action for fraud predicated on a false promise is deficiently pleaded because all of the requisite elements of the claim are not pleaded. In order “[t]o maintain an action for deceit based on false promise, one must specifically allege and prove, among other things, that the promisor did not intend to perform at the time he or she made the promise and that it was intended to deceive or induce the promise to do or not do a particular thing. [Citations.] Given this requirement, an action based on false promise is simply a type of intentional misrepresentation, i.e., actual fraud.” (Tarmann v. State Farm Mut. Auto. Ins. (1991) 2 Cal.App.4th 153, 159.)
Here, Iguanas alleges that Del Golfo did not intend to perform as promised when it made the promise to deliver Angus beef to its restaurants (FACC, ¶ 32); Del Golfo insists that this allegation is insufficient to plead the element of a lack of intent to perform because there are no facts pleaded regarding why Del Golfo did not so intend. However, “the representation (implied) is that of the intention to perform [citation]; the truth is the lack of intention. Purely evidentiary matters- usually circumstantial evidence or admissions showing lack of that intention- should not be pleaded. Hence the only necessary averment is the general statement that the promise was made without the intention to perform it, or that the defendant did not intend to perform it.” (5 Witkin, California Procedure (5th ed. 2008) Pleading, § 725, citing Russ Lumber & Mill Co. v. Muscupiabe Land & Water Co. (1898) 120 Cal. 521, 524, etc. [emphasis added].) Because Iguanas has made this general averment regarding a lack of intent, Del Golfo’s argument is without merit. Therefore, Del Golfo’s demurrer to the second cause of action on the ground of failure to state facts sufficient to constitute a cause of action is OVERRULED.
With respect to the third cause of action for fraud based on negligent misrepresentation, while this claim is sometimes considered a distinct tort, California statutes still classify it as a form of deceit. (Civ. Code, § 1710(2).) The only significant difference for pleading purposes between negligent misrepresentation and deceit is that the former does not involve the element of “scienter.” (Gagne v. Betran (1954) 43 Ca1.2d 481, 487-481.) If a plaintiff cannot truthfully allege actual knowledge of falsity on the part of the individual who made the alleged misrepresentation, then he can set forth facts showing that the representation was made without reasonable grounds for believing it to be true and thus state a claim for negligent misrepresentation. (Id.)
Del Golfo insists that as with the preceding claims, this cause of action is insufficiently pleaded because there are no facts alleged in the FACC which support Iguanas’ assertion that it possessed the requisite intent to defraud. But, as explained above, when it comes to pleading fraud, intent to deceive is a fact and therefore sufficiently pleaded by the general averment that a defendant intended to defraud the plaintiff. (See, e.g., Hall v. Mitchell (1922) 9 Cal.App. 743; see also 5 Witkin, California Procedure (5th ed. 2008) Pleading, §§ 726, 728.) As such an averment has been made with respect to the third cause of action (see FACC, ¶¶ 22-28), Del Golfo’s assertion that this claim is not adequately pleaded is without merit. Consequently, its demurrer to the third cause of action on the ground of failure to state facts sufficient to constitute a cause of action is OVERRULED.
Finally, with respect to the remaining cause of action at issue for fraud predicated on concealment, Del Golfo argues that its demurrer to the claim should be sustained because Iguanas has not specifically pleaded how, where, when and by what means it purportedly concealed or suppressed material facts from the company. Additionally, Del Golfo again insists that no facts are pleaded establishing its intent to defraud, but this argument is without merit for the reasons explained above.
The elements of a claim for fraud and deceit based on concealment, specifically, are as follows: “(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.” (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 748.) In making the argument that it has, Del Golfo conflates the elements of a claim for fraud based on an affirmative misrepresentation with one predicated on concealment and/or nondisclosure. While in a situation where the “duty to disclose arises from the making of misrepresentations that were misleading or false” those allegations must be set forth in terms of specific facts establishing “how, where, when, to whom, and by what means” the misrepresentations were made, the rule of specificity is harder to apply in a case of nondisclosure or concealment because “[h]ow does one show ‘how’ and ‘by what means’ something didn’t happen, or ‘when’ it never happened, or ‘where’ it never happened?” (Alfaro v. Community Housing Imp. System & Planning Ass’n., Inc. (2009) 171 Cal.App.4th 1356, 1384.) Consequently, in alleging that Del Golfo had a duty to disclose certain material facts and that Del Golfo did not disclose and intentionally concealed those facts (see FACC, ¶¶ 41-51), Iguanas has sufficiently pleaded its fourth cause of action for fraud based on concealment and nondisclosure. Therefore, Del Golfo’s demurrer to the fourth cause of action on the ground of failure to state facts sufficient to constitute a cause of action is OVERRULED.
III. Motion to Strike

With its motion to strike, Del Golfo moves to strike Iguanas’ request for punitive damages and all allegations relating thereto on the ground that Iguanas fails to plead facts which entitle it to recover such damages.

The right to exemplary or punitive damages requires proof of “oppression, fraud, or malice” on the part of the defendant by “clear and convincing evidence.” (Civ. Code, § 3294, subd. (a).) For pleading purposes, in order to support a prayer for punitive or exemplary damages, the complaint must allege “ultimate facts of the defendant’s oppression, fraud or malice.” (Cyrus v. Haveson (1976) 65 Cal.App.3d 306, 316-317.) Simply pleading the statutory terms “oppression, fraud or malice” is insufficient to adequately allege punitive damages, but only to the extent that the complaint pleads facts to support those allegations. (Blegen v. Superior Court (1986) 176 Cal.App.3d 503, 510-511.) Therefore, specific factual allegations demonstrating oppression, fraud or malice are required. (Brousseau v. Jarrett (1977) 73 Cal.App.3d 864, 872.) However, the complaint will be read as a whole so that even conclusory allegations may suffice when read in context with facts alleged as to the defendant’s wrongful conduct. (Perkins v. Super. Ct. (1981) 117 Cal.App.3d 1, 6-7; Clauson v. Super. Ct. (1998) 67 Cal.App.4th 1253, 1255).
Here, malice, fraud and oppression all serve as the foundation for Plaintiffs’ punitive damages request. Under the punitive damages statute, Civil Code section 3294, “malice” is defined as 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 of the rights or safety of others.” (Civ. Code, § 3294, subd. (c)(1).) “Oppression” is defined as “despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights.” (Id., § 3294, subd. (c)(2).) “Despicable conduct,” in turn, has been described as conduct that is “so vile, base, contemptible, miserable, wretched or loathsome that it would be looked down upon and despised by ordinary decent people.” (Mock v. Michigan Millers Mutual Ins. Co. (1992) 4 Cal.App.4th 306, 331.) Finally, “fraud” is defined as “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.” (Civ. Code, § 3294, subd. (c)(3).)
While Del Golfo insists that Iguanas fails to plead facts sufficient to establish oppressive, maliciously or fraudulent conduct on its part in the FACC, and thus its entitlement to punitive damage, a properly pleaded fraud claim will generally by itself support the recovery of punitive damages. (See Stevens v. Superior Court (1986) 180 Cal.App.3d 605, 610.) As Iguanas has pleaded such a claim (see above), it has pleaded an entitlement to these damages. Accordingly, Del Golfo’s motion to strike is DENIED.