Case Name: Jason Pacheco, et al. v. Henry Gong, et al.
Case No.: 2015-1-CV-277367

This action arises from disputes pertaining to a lease agreement and attendant option to purchase residential real property. The pleading at issue herein is the Third Amended Cross-Complaint (“TACC”) filed by landlords Henry Gong and Jasmine Gong (collectively “the Gongs”) against tenants Jason Pacheco and Shanna Pacheco (collectively “the Pachecos”) as well as Shannon Pacheco’s alleged associate, Jessica Geis (“Geis”). The matter before the Court pertains to Geis in particular.

According to the allegations of the TACC, in 2008, the Pachecos entered into a lease agreement for the occupancy of certain real property owned by the Gongs. In July 2012, when the lease came up for renewal, the Gongs and the Pachecos executed a new agreement consisting of a lease and option to purchase (“Agreement”). With respect to the purchase option, the Agreement provided the Pachecos an option to buy the property for $1.6 million. The total option price was $600,000, to be paid in three nonrefundable deposits by specified dates in 2012, 2013 and 2014. After the option price was fully paid, the Pachecos could exercise the option to purchase the property by August 31, 2017. If the option was timely exercised, the option-price deposits would be credited toward the purchase price. However, in the event of any default of the Agreement during the option period, the deposits and purchase option would be lost unless the default was cured within 60 days.

The Pachecos paid the first two nonrefundable deposits totaling $350,000, but failed to pay the third scheduled deposit of $250,000. They were consequently in default of the Agreement, and failed to cure the default within 60 days. To recoup the nonrefundable deposits already made, the Pachecos and Geis formulated and executed a plan to create a false dispute regarding the subject property and cloud the property’s title. In short, through alleged factual misrepresentations and concealments regarding the Pachecos’ ability or inability to secure funding to purchase the subject property, the Pachecos and Geis created the framework for the Pachecos to claim an entitlement to a portion of the proceeds of any sale of the subject property to a third party and an ongoing right to occupy the premises. Their conduct in this regard rendered the property unsaleable.

The Gongs assert the following causes of action against Geis: Sixth Cause of Action for Intentional Interference with Economic Advantage, Seventh Cause of Action for Negligent Interference with Economic Advantage, Eighth Cause of Action for Aiding and Abetting, Ninth Cause of Action for Fraud, Tenth Cause of Action for Negligent Misrepresentation and Eleventh Cause of Action for Conspiracy.

Geis presently demurs to each cause of action asserted against her. The Gongs oppose the demurrer on procedural and substantive grounds.

I. Procedural Issues

The Gongs complain in opposition to the demurrer that the notice of hearing is defective and Geis failed to meet and confer prior to bringing the demurrer.

With respect to the notice issue, the Gongs merely state “[t]he notice of hearing suggests that the hearing is to be held on July 28, 2016, a date that is passed.” (Opp., p. 2:16-17.) The Gongs insinuate thereby that the notice is defective, although they do not directly argue as such or state how any notice defect should impact the demurrer. When a party opposes a motion on the ground of insufficient notice but otherwise addresses the merits and does not claim any prejudice, the party waives any defect or irregularity. (See Carlton v. Quint (2007) 77 Cal.App.4th 690, 697-698.) Here, Geis incorrectly identified the original hearing date in the body of the notice as July 28, but correctly identified the date as September 8, 2016 in the caption. The Gongs do not claim any prejudice resulting from the clerical error, clearly had actual notice of the demurrer, and address the merits of the demurrer in their opposition. Thus, the Gongs’ suggestion that the notice of hearing is defective is not a fatal procedural defect.

On the subject of meeting and conferring, the Gongs argue the demurrer “should be denied” for Geis’s failure to meet and confer as required by statute. (Opp., p. 2:10-13.) They do not elaborate any further.

Code of Civil Procedure section 430.41 provides that before filing a demurrer, the demurring party must meet and confer with the party who filed the pleading in question for the purpose of determining whether informal resolution of the objections to be raised by demurrer is achievable. (Code Civ. Proc., § 430.41 subd. (a).) If informal resolution is not accomplished and a demurrer is ultimately filed, the demurring party shall file and serve a declaration with the demurrer addressing the meet and confer process. (Code Civ. Proc., § 430.41, subd. (a)(3).)

Geis neglected to file a meet-and-confer declaration with her demurrer. She did, however, file such a declaration with her reply brief in response to the Gongs’ assertion of failure to meet and confer. The declaration, executed by Geis’ counsel, reflects he sent a meet-and-confer email to the Gongs’ counsel on July 6, 2016, as well as a follow-up email indicating no response was received. The July 6 email was terse and did not set forth any supporting legal authorities. The email was technically insufficient because the statute explicitly requires meeting and conferring “in person or by telephone” and contemplates identifying the purported pleading deficiencies “with legal support.” (See Code Civ. Proc., § 430.41, subds. (a).) With that said, Geis at least made some effort to meet and confer. Furthermore, a court may not overrule a demurrer based on a determination that the meet and confer process was insufficient. (Code Civ. Proc., § 430.41 subd. (a)(4).) The Court will therefore reach the merits of the demurrer. All counsel are expected to fully comply with section 430.41 in the future.

II. Request for Judicial Notice

Geis requests judicial notice of the First Amended Cross-Complaint (“FACC”) in support of her demurrer.

When ruling on a demurrer, a court may consider matters subject to judicial notice. (Code Civ. Proc., § 430.30, subd. (a).) Court records are expressly subject to judicial notice pursuant to Evidence Code section 452, subdivision (d), and the contents of the FACC are central to Geis’s argument on demurrer that the TACC is a sham pleading. The request for judicial notice is therefore GRANTED.

III. Merits of Demurrer

Geis demurs to the sixth through eleventh causes of action on the grounds of uncertainty and failure to state sufficient facts to constitute a cause of action. (See Code Civ. Proc., § 430.10, subds. (e), (f).) For the reasons set forth below, the demurrer is OVERRULED in its entirety.

A. Uncertainty

Geis specifically cites Code of Civil Procedure section 430.10, subdivision (f) as a statutory basis for her demurrer to each cause of action. (See Dem., pp. 1-3.) That provision provides a pleading is subject to demurrer if it is “uncertain.”

Geis does not affirmatively assert, however, that any cause of action against her is uncertain. Moreover, Geis’ supporting memorandum of points and authorities is devoid of any discussion of the demurrer for uncertainty. (See Cal. Rules of Court, 3.1113(b) [memorandum must contain statement of law, arguments relied on, and discussion of law cited in support of position advanced].) In view of the absence of any specific argument addressing the subject of uncertainty, Geis apparently misapprehends the nature of a demurrer on this ground.

The law is settled that “[a] special demurrer for uncertainty is not intended to reach the failure to incorporate sufficient facts in the pleading but is directed at the uncertainty existing in the allegations actually made.” (Butler v. Sequeira (1950) 100 Cal.App.2d 143, 145-146.) To avoid a demurrer for uncertainty, a pleading merely needs to “ ‘set forth the essential facts of [the] case with reasonable precision and with particularity sufficient to acquaint a defendant with the nature, source and extent of [the] cause of action.’ [Citations.]” (Semole v. Sansoucie (1972) 28 Cal.App.3d 714, 719.) Thus, a demurer for uncertainty “should not be sustained if the allegations are sufficiently clear to apprise the defendant of the issues that must be met, even if the allegations of the complaint may not be as clear and as detailed as might be desired.” (Merlino v. West Coast Macaroni Mfg. Co. (1956) 90 Cal.App.2d 106, 108.)

Geis has not identified any particular uncertainties in the allegations actually pled that would render the subject causes of action vulnerable to demurrer under applicable standards.
Accordingly, the unsubstantiated demurrer to the sixth, seventh, eighth, ninth, tenth and eleventh causes of action on the ground of uncertainty is OVERRULED.

B. Failure to State Sufficient Facts

Geis contends the sixth through eleventh causes of action fail to state any viable claim against her.

In addressing the demurrer to each cause of action, Geis argues as a preliminary matter that the TACC is a sham pleading and “should be stricken.” (See Dem., p. 8:23-25.)

Generally, after an amended pleading is filed, the original pleading is superseded (Vallejo Development Co. v. Beck Development Co. (1994) 24 Cal.App.4th 929, 946), and courts will assume the truth of the factual allegations in the amended pleading for purposes of demurrer (Owens v. Kings Supermarket (1988) 198 Cal.App.3d 379, 383). However, under the sham pleading exception to these rules, “ ‘admissions in an original complaint … remain within the court’s cognizance and the alteration of such statements by amendment designed to conceal fundamental vulnerabilities in a plaintiff’s case will not be accepted.’ ” (Lockton v. O’Rourke (2010) 184 Cal.App.4th 1051, 1061.) Where a plaintiff attempts to avoid the defective allegations in a prior complaint by omitting them without explanation, or by pleading facts inconsistent with such prior allegations, the court may then examine the prior complaint to ascertain whether the amended complaint is merely a sham. (Vallejo Development Co. v. Beck Development Co., supra, at p. 946.) Absent an adequate explanation, the court may disregard the inconsistent allegations and read into the amended complaint the allegations of the superseded complaint. (Owens v. Kings Supermarket, supra, 198 Cal.App.3d at p. 384.) “The purpose of the [sham pleading] doctrine is to enable the courts to prevent an abuse of process. [Citation.] The doctrine is not intended to prevent honest complainants from correcting erroneous allegations or to prevent the correction of ambiguous facts. [Citation.]” (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 751; see also Deveny v. Entropin, Inc. (2006) 139 Cal.App.4th 408, 425-426.)
Here, Geis maintains the allegations in the TACC contradict the allegations in paragraphs 54-56 of the FACC, which previously alleged as follows: “54. At no time did Tenants inform Henry Gong that they had the financing arrangement with Jessica Geis. [¶] 55. Jessica Geis did not inform Henry Gong of her agreement to put up the monty to pay the third ‘deposit’ of $250,000. [¶] 56. The agreement between Jessica Geis and Tenants about the alleged financing arrangement remained secret until August 2015.” These allegations were cited in the Court’s order on Geis’ demurrer to the FACC, particularly relative to the fraud and negligent misrepresentation causes of action. This Court was primarily focused on the lack of any specific allegation that Geis made some representation to the Gongs. To that point, the Court observed the allegations in paragraphs 54-56 reflected the Gongs had no knowledge of Geis during the relevant time period such that “there could not have been any reliance on a nonexistent representation from Geis.”

According to Geis, the TACC now incompatibly alleges, without explanation, that certain communications by Shanna Pacheco were made to the Gongs on behalf of both the Pachecos and Geis. Giving consideration to the totality of the amendments made in the TACC and the specific wording found in paragraphs 54-56 of the FACC, the Court is not persuaded that the sham pleading doctrine is necessarily implicated. As such, the Court will not disregard any allegations in the TACC in evaluating the substantive arguments raised in support of the demurrer to each cause of action.

1. Sixth and Seventh Causes of Action

Geis argues the sixth cause of action for intentional interference with prospective economic advantage and seventh cause of action for negligent interference with prospective economic advantage fail to state a cause of action on two bases.

First, Geis contends her offer to make a loan to the Pachecos was not an independently wrongful act. To be actionable, a cause of action for intentional or negligent interference with prospective economic advantage requires the defendant’s conduct be “independently unlawful,” meaning “ ‘proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard.’ ” (Winchester Mystery House, LLC v. Global Asylum, Inc. (2012) 210 Cal.App.4th 579, 596 [intentional interference]; National Medical Transp. Network v. Deloitte & Touche (1998) 62 Cal.App.4th 412, 440 [negligent interference].)

Geis characterizes the Gongs’ interference claims as predicated upon her simply making a loan to a friend, and argues such conduct is not independently unlawful. This characterization is an oversimplification of the Gongs’ claims, which are rooted in fraud (e.g., the loan offer to the Gongs was “bogus” and part of an intentional plan to interfere with their economic relationship with the Pachecos). Perhaps anticipating the Court might find as such, Geis adds that no actionable fraud has been alleged because the TACC is a sham pleading and the Gongs fail to adequately allege the element of reasonable and justifiable. However, for the reasons articulated below in connection with the fraud cause of action, Geis does not sufficiently substantiate her position that the fraud claim is defective for pleading purposes.

Next, Geis asserts her alleged conduct was not a “substantial factor” in causing any harm to the Gongs. An essential element of both intentional and negligent interference with prospective economic advantage is economic harm proximately caused by the acts of the defendant. (Blank v. Kirwan (1985) 39 Cal.3d 311, 330 [intentional interference]; North American Chemical Co. v. Superior Court (1997) 59 Cal.App.4th 764, 786 [negligent interference].) California courts apply the “substantial factor” test in evaluating the element of causation in tort cases (See Osborn v. Irwin Memorial Blood Bank (1992) 5 Cal.App.4th 234, 252-253), but Geis does not actually identify what the substantial factor test is or evaluate the allegations in the TACC relative to that test. Instead, she merely makes a series of arguments based on her interpretation of the facts alleged in the pleading without regard to applicable legal standards on demurrer. (See Committee on Children’s Television, Inc. v. General foods Corp. (1983) 35 Cal.3d 197, 213-214 [“A demurrer tests only the legal sufficiency of the pleading. It admits the truth of all material factual allegations in the complaint; the question of plaintiff’s ability to prove these allegations, or the possible difficulty in making such proof does not concern the reviewing court.”].)

In consideration of the foregoing, the demurrer to the sixth and seventh causes of action on the ground of failure to state sufficient facts is OVERRULED.

2. Eighth Cause of Action

Geis contends the eighth cause of action for aiding and abetting is defective because the conduct complained of does not constitute substantial assistance and was not a substantial factor in causing any harm to the Gongs. While Geis clearly identifies the bases for the demurrer, she does not actually engage in any discussion of the issues raised. To be clear, in her supporting memorandum of points and authorities, these issues are generally identified in a heading at page 15, but the text that follows mere consists of a recitation of general principles of law pertaining to aider and abettor liability. Geis fails to engage in any discussion of the law relative to the allegations in the TACC in order to demonstrate the eighth cause of action is deficient for pleading purposes. As such, the demurrer is unsubstantiated. The demurrer to the eighth cause of action on the ground of failure to state sufficient facts is therefore OVERRULED.

3. Ninth and Tenth Causes of Action

Geis asserts the ninth cause of action for fraud and tenth cause of action for negligent misrepresentation fail to state sufficient facts.

“The elements of fraud are (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. [Citation.] The elements of negligent misrepresentation are the same except for the second element, which for negligent misrepresentation is the defendant made the representation without reasonable ground for believing it to be true.” (West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 792.)
In her demurrer, Geis lists one of the bases for her demurrer to the fraud and negligent misrepresentation claims that “[t]he TACC does not allege any specifically identified duty, contractual or otherwise, that Geis owed to Gong.” (Dem., pp. 2:13-28 to 3:1-7.) In her supporting memorandum of points and authorities, however, she does not actually advance any argument on that point or cite any legal authority for the proposition that the existence of a duty is an elemental component of a cause of action for fraud and/or negligent misrepresentation.

Next, Geis contends the Gongs’ claims are defective because “the lack of any communication or contact between Geis and Gong, or Gong’s lack of knowledge of Geis’ existence, prevents Gong from establishing that they reasonably and justifiably relied upon any alleged statement or communication made by Geis.” (Dem., pp. 2:13-28 to 3:1-7.) In support, Geis relies in part on the sham pleading doctrine and also cites various portions of the pleading to support her interpretation of the factual allegations as reflecting the absence of justifiable reliance. Once again, the Court is not persuaded that the sham pleading doctrine applies in this case. Furthermore, the question of justifiable reliance is ordinarily a question of fact that cannot be resolved on demurrer; only in exceptional cases will the issue be capable of resolution as a matter of law. (Beckwith v. Dahl (2012) 205 Cal.App.4th 1039, 1067.) The Court is not convinced the allegations appearing on the face of the pleading render this such an exceptional case.

For these reasons, the demurrer to the ninth and tenth causes of action on the ground of failure to state sufficient facts is OVERRULED.

4. Eleventh Cause of Action

Geis argues the eleventh cause of action for conspiracy is defective because “[t]he TACC does not allege any specifically identified duty, contractual or otherwise, that Geis owed to the Gongs” and “absent any such duty, the allegations of conspiracy do not independently support a cause of action by the Gongs against Geis.” (Dem., p. 3:10-14.) In her supporting memorandum of points and authorities, Geis does not preliminarily cite any legal authority or advance any argument to that point. Instead, she immediately refers to the Gongs’ opposition to their prior demurrer to the Second Amended Cross-Complaint, which was ultimately deemed moot, and preemptively attempts to distinguish the case relied upon by Geis therein.

Geis’ argument derives from the proposition a conspiracy claim is not actionable unless the defendant owed the plaintiff a duty independent of the conspiracy itself. However, as articulated in Fuller v. First Franklin Financial Corp. (2013) 216 Cal.app.4th 955, every person has a duty not to commit an intentional tort such as fraud. (Fuller v. First Franklin Financial Corp. (2013) 216 Cal.app.4th 955, 967.) “Thus, there can be liability for conspiring to commit an intentional tort even absent any duty.” (Ibid. [emphasis original]; see also Stueve Bros. Farms, LLC v. Berger Kahn (2013) 222 Cal.App.4th 303, 323.) Here, the conspiracy cause of action is predicated upon fraud. Geis’ argument therefore fails, and the demurrer to the eleventh cause of action on the ground of failure to state sufficient facts is OVERRULED.