Case Number: 19STCV03306 Hearing Date: September 23, 2019 Dept: 31

DEMURRER TO THE COMPLAINT OVERRULED IN PART, SUSTAINED IN PART.

Background

On January 31, 2019, Plaintiff Herbert Gomez filed the instant action against Defendants Javier Barajas and JB Development Group, LLC (“JB Development”). The Complaint asserts causes of action for:

Fraud;

Unfair Business Practices in Violation of Cal. Bus. & Prof. Code § 17200;

Breach of Contract; and

Unjust Enrichment.

Defendants demur to the Complaint.

Legal Standard

A demurrer for sufficiency tests whether the complaint states a cause of action. Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747. When considering demurrers, courts read the allegations liberally and in context. (Wilson v. Transit Authority of City of Sacramento (1962) 199 Cal.App.2d 716, 720-21.) In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) “A demurrer tests the pleading alone, and not on the evidence or facts alleged.” (E-Fab, Inc. v. Accountants, Inc. Servs. (2007) 153 Cal.App.4th 1308, 1315.) As such, the court assumes the truth of the complaint’s properly pleaded or implied factual allegations. (Id.) However, it does not accept as true deductions, contentions, or conclusions of law or fact. (Stonehouse Homes LLC v. City of Sierra Madre (2008) 167 Cal.App.4th 531, 538.)

Discussion

First Cause of Action for Fraud

The necessary elements of fraud are: (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 damage. (Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1239.) “The law is well established that actionable misrepresentations must pertain to past or existing material facts. [Citation] Statements or predictions regarding future events are deemed to be mere opinions which are not actionable. [Citation]” (Cansino v. Bank of America (2014) 224 Cal.App.4th 1462, 1469-1470.)

Fraud causes of actions must be pled with specificity in order to give notice to the defendant and to furnish him or her with definite charges. (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal. 3d 197, 216, superseded by amendments to the Unfair Competition Law contained in Proposition 64 on unrelated grounds.) “(a) General pleading of the legal conclusion of ‘fraud’ is insufficient; the facts constituting the fraud must be alleged. (b) Every element of the cause of action for fraud must be alleged in the proper manner (i.e., factually and specifically), and the policy of liberal construction of the pleadings … will not ordinarily be invoked to sustain a pleading defective in any material respect. [Citations.]” (Ibid.)

This particularity “necessitates pleading facts which show how, when, where, to whom, and by what means the representations were tendered.” (Lazar v. Sup. Ct. (1996) 12 Cal.4th 631, 645.) However, “[l]ess specificity is required when ‘it appears from the nature of the allegations that the defendant must necessarily possess full information concerning the facts of the controversy,’ [Citations]; ‘[e]ven under the strict rules of common law pleading, one of the canons was that less particularity is required when the facts lie more in the knowledge of the opposite party . . . .’ (Committee On Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 217.)

Defendants demur to the first cause of action for fraud on the grounds that (1) it fails to provide the required specificity for allegations of fraud, (2) there are no allegations relating to Defendant Barajas individually, and (3) the Complaint fails to allege a false representation, intent to deceive or induce reliance, and justifiable reliance.

Defendant argues that Plaintiff merely makes conclusory statements that JB Development failed to submit plans to the City. Defendant asserts that not only does Plaintiff fail to provide any legitimate means of backing or ratifying his claim, but the claim is incorrect per Exhibit B attached to the demurrer. Defendants contend that the Complaint indicates that JB Development submitted plans to Plaintiff after the agreement was closed. Defendants argue that, as such, there can never factually be an intent to induce reliance or justifiable reliance – the parties already had an agreement and exchanged services.

In opposition, Plaintiff argues that Defendants arguments are without merit as the Complaint alleges joint and several liability for the actions and inactions of the two named Defendants.

The Court finds that Plaintiff has failed to allege facts sufficient to state a cause of action for fraud. The Complaint fails to allege a misrepresentation by Defendants that induced Plaintiff to enter into the initial oral contract whereby “it was understood and agreed by both parties that electrical plans were to be submitted to the DWP upon the payment by the Plaintiff of $16,000.00.” (Complaint ¶ 10.)

Additionally, although Plaintiff alleges that “by 1/25/18 the Defendants had collected an additional $35,000.00 from Plaintiffs by the fraudulent act of misrepresenting plans to Plaintiff on 12/19/17 which were actually electrical plans to a property in Long Beach” and “said plans to the Long Beach property were used to trick Plaintiff into believing that the Defendant was performing as agreed,” the Complaint fails to indicate how Plaintiff’s payment of the $35,000.00 was not merely pursuant to the purported contract that was entered into by the parties and instead was induced by Defendants’ alleged misrepresentation. Accordingly, Plaintiff has failed to allege reasonable reliance on Defendants’ representation in making the additional payment of $35,000.00.

Based on the foregoing, Defendants’ demurrer to the first cause of action for fraud is SUSTAINED with leave to amend.

Second Cause of Action for Unfair Business Practices in Violation of Business & Professions Code section 17200, et seq.

California Business and Professions Code section 17200 prohibits “any unlawful, unfair or fraudulent business act or practice.” (Cal. Bus. & Prof. Code § 17200; see Clark v. Superior Court (2010) 50 Cal.4th 605, 610.) Section 17200 further prohibits unfair, deceptive, untrue, or misleading advertising. (See Cal. Bus. & Prof. Code, § 17200; People v. Dollar Rent-A-Car Systems, Inc. (1989) 211 Cal.App.3d 119, 129.) UCL actions based on “unlawful” conduct may be based on violations of other statutes. (See Klein v. Chevron U.S.A., Inc. (2012) 202 Cal.App.4th 1342, 1383.)

““To state a cause of action under these statutes . . . , it is necessary only to show that ‘members of the public are likely to be deceived.’” [Citation.] Actual deception or confusion caused by misleading statements is not required. [Citation.] An “unfair” practice under section 17200 is one “whose harm to the victim outweighs its benefits.” [Citation.] In a similar vein, the term “fraudulent” as used in the section “does not refer to the common law tort of fraud but only requires a showing members of the public ‘are likely to be deceived.’” [Citation.] No proof of direct harm from a defendant’s unfair business practice need be shown, such that “[a]llegations of actual deception, reasonable reliance, and damage are unnecessary.” [Citation.] Section 17200 has been interpreted broadly to bar all ongoing wrongful business activity, including misleading advertising, in whatever context it presents itself. [Citation.]” (Day v. AT & T Corp. (1998) 63 Cal.App.4th 325, 332.)

Defendants demur to the second cause of action for unfair business practices on the grounds that the Complaint fails to allege facts sufficient to state a cause of action. Defendants argue that first, the Complaint fails to allege any purportedly “unlawful” business practice within the meaning of section 17200, as Plaintiff fails to identify which law Defendants violated. Defendants assert that second, Plaintiff merely states that “Defendant has committed unfair competition” but nowhere specifies the particular “unfair competition” upon which the claim is based. Defendants finally contend that the Complaint fails to present allegations that show Defendant Barajas personally liable.

In opposition, Plaintiff argues that he has sufficiently alleged his claim for unfair business practices in violation of section 17200.

The Court finds that Plaintiff has alleged facts sufficient to state a cause of action for unfair business practices. Plaintiff alleges that “Defendant has engaged in the past, and continues to engage in the bad faith corporate practice of taking advantage of clients by misleading them in order to get paid for work that has been performed as agreed. Defendant’s aforementioned bad faith practices include misrepresenting plans for unrelated property as the plans of the property actually under contract, thereby tricking individuals such as Plaintiff into believing that work has been performed which has not, and thereby enticing clients by fraud into paying monies to Defendant which are not yet due.” (Complaint ¶ 20.) It also alleges that “Defendant has employed or plans to further employ each of the alleged practices of making false misrepresentations to clients, to create obligations on clients financially beneficial to Defendant, and then to bring litigations to strong arm settlements from clients who realize they have been defrauded by Defendant and refuse to perform the contractual obligations they originally agreed to because of Defendant’s fraudulent inducements, and fraudulent misrepresentations of performance.” (Complaint ¶ 21.) From these allegations, it can be inferred that members of the public are likely to be deceived from these actions, as Plaintiff alleges that clients have been misled and taken advantage of.

Based on the foregoing, Defendants’ demurrer to the second cause of action for unfair business practices is OVERRULED.

Third Cause of Action for Breach of Contract

To state a claim for breach of contract, a Plaintiff must allege sufficient facts to establish: (1) a contract between the parties; (2) plaintiff’s performance or excuse for nonperformance; (3) defendant’s breach; and (4) damages to plaintiff from the breach. (See e.g. Wall Street Network, Ltd. v. New York Times Co. (2008) 164 Cal.App.4th 1171, 1178.) A contract must be pled verbatim in the body of the complaint, be attached to the complaint and incorporated by reference, or be pled according to its legal effect. (Bowden v. Robinson (1977) 67 Cal.App.3d 705, 718.) “In order to plead a contract by its legal effect, plaintiff must ‘allege the substance of its relevant terms. This is more difficult, for it requires a careful analysis of the instrument, comprehensiveness in statement, and avoidance of legal conclusions.’” (McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1489.)

Defendants demur to the third cause of action on the grounds that the Complaint fails to indicate the terms of the agreement, their construct, information surrounding the alleged terms, whether JB Development was ever bound, and how Defendant Barajas can be held liable. Defendants argue that in the one agreement that Plaintiff attaches to the Complaint, the words “JB Development” is clearly displayed at the top of the agreement, directly demonstrating there was some form of written agreement between Plaintiff and JB Development, but never a singular agreement between Plaintiff and Defendant Barajas.

In opposition, Plaintiff argues that he has sufficiently pled his claim for breach of contract.

The Court finds that Plaintiff has failed to allege facts sufficient to state a cause of action for breach of contract. While the Complaint alleges that an oral contract was entered into by the parties, the Complaint fails to allege the key terms of the contract such that any of Defendants’ actions can be deemed to be a breach of the contract. The Complaint merely alleges the purported “objectives” of the contract, but does not indicate how a payment of $35,000.00 to Defendants would obligate Defendants to “provide acceptable plans to the DWP.” (Complaint ¶ 24.) Without the specific terms of any contract, Plaintiff has not stated a cause of action for breach of the contract.

Based on the foregoing, Defendants’ demurrer to the third cause of action for breach of contract is SUSTAINED with leave to amend.

Fourth Cause of Action for Unjust Enrichment

There is a split of authority on whether unjust enrichment is a cause of action. “The phrase ‘Unjust Enrichment’ does not describe a theory of recovery, but an effect: the result of a failure to make restitution under circumstances where it is equitable to do so.” (Lauriedale Associates, Ltd. v. Wilson (1992) 7 Cal.App.4th 1439, 1448.) “Unjust enrichment is ‘a general principle, underlying various legal doctrines and remedies,’ rather than a remedy itself.” (Melchior v. New Line Cinema (2003) 106 Cal.App.4th 779, 793 [quoting Dinosaur Development, Inc. v. White (1989) 216 Cal.App.3d 1310, 1315].)

Still, where it has been held to be a cause of action, “[t]he elements of a cause of action for unjust enrichment are simply stated as ‘receipt of a benefit and unjust retention of the benefit at the expense of another.’ [Citation.] . . . “The term ‘benefit’ ‘denotes any form of advantage.’” [Citation.] “[T]he benefit that is the basis of a restitution claim may take any form, direct or indirect. It may consist of services as well as property. A saved expenditure or a discharged obligation is no less beneficial to the recipient than a direct transfer.” [Citation.]” (Professional Tax Appeal v. Kennedy-Wilson Holdings, Inc. (2018) 29 Cal.App.5th 230, 238.)

Defendants demur to the fourth cause of action for unjust enrichment on the grounds that unjust enrichment is not a cause of action. Defendants argue that in the alternative, the one-paragraph mention of unjust enrichment is far too lacking to constitute a cause of action for unjust enrichment.

In opposition, Plaintiff argues that unjust enrichment is a cause of action citing to Professional Tax Appeal v. Kennedy-Wilson Holdings, Inc., a November 2018 Court of Appeal opinion from the Second District. ((2018) 29 Cal.App.5th 230, 238.)

The Court finds that Plaintiff has alleged facts sufficient to state a cause of action for unjust enrichment. The Complaint alleges that “Defendant was unjustly enriched by the receipt of $52,000 for which virtually no work of any kind was performed, and that which was performed was so tardily performed [sic] that it provided no economic value to the Plaintiff. The labor and materials actually provided by Defendant had a value of approximately $3,000.00 and Defendant was thereby unjustly enriched by $49,000.00.” Accordingly, Plaintiff has sufficiently alleged that Defendant received a benefit at the expense of Plaintiff.

Based on the foregoing, Defendants’ demurrer to the fourth cause of action for unjust enrichment is OVERRULED.

Conclusion

Defendants’ demurrer to the second and fourth causes of action is OVERRULED. Defendants’ demurrer to the first and third causes of action is SUSTAINED with 20 days’ leave to amend.

Moving party to give notice.