Demurrer and Motion to Strike by Defendant Ford Motor Company to the First Amended Complaint of Plaintiffs Joseph D. Verch and Carole A. Verch

This is a lemon law action. On June 3, 2006, Plaintiffs purchased a new 2006 Ford F-350 truck with a defective 6.0-liter engine, based on representations the engine was reliable and offered superior power. (See First Amended Complaint [“FAC”] at ¶¶ 8-9.) Ford has attempted to make repairs to the vehicle on at least fourteen (14) separate occasions and failed to permanently remedy the truck’s persistent problems. (Id. at ¶ 21.) Plaintiffs allege that the ongoing problems with the truck have impaired their use of the vehicle. (Id. at ¶ 22.)

On January 9, 2014, Plaintiffs filed a FAC against Ford, now the operative pleading, alleging the following claims: (1) fraud in the inducement—intentional misrepresentation; (2) fraud in the inducement—concealment; (3) negligent misrepresentation; (4) fraud in performance of contract—intentional misrepresentation; (5) violation of Consumer Legal Remedies Act (“CLRA”); and (6) violation of the Song-Beverly Act.

On February 7, 2014, Ford filed the motions presently before the court, a demurrer to the first, second, third, fourth, and fifth causes of action for failure to state a claim and a motion to strike portions of the FAC.

Evidence

Ford’s request for judicial notice is GRANTED. (See Evid. Code § 452, subd. (d); see also De Asis v. Department of Motor Vehicles (2003) 112 Cal.App.4th 593, 597, fn. 3 [court may take judicial notice of the public and private official acts of the legislative, executive, and judicial departments of the state].)

Plaintiffs’ request for judicial notice is GRANTED. Pursuant to Evidence Code section 452, the court takes judicial notice of the existence of these documents as records of the courts in this state. However, the court does not take judicial notice of the truth of any factual assertions appearing in the documents. (See Arce v. Kaiser Foundation Health Plan, Inc. (2010) 181 Cal.App.4th 471, 483.)

Demurrer to the FAC

1. Fraud Causes of Action (First, Second, Third, Fourth)

With respect to the first, second, third, and fourth causes of action, Ford argues that the fraud claims are barred by the economic loss rule and the statute of limitations.

A. Economic Loss Rule
Economic loss consists of damages for inadequate value, costs of repair and replacement of the defective product or consequent loss of profits—without any claim of personal injury or damages to other property. (See Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 988.) “The economic loss rule requires a purchaser to recover in contract for purely economic loss due to disappointed expectations, unless he can demonstrate harm above and beyond a broken contractual promise.” (Ibid.) In short, “the economic loss rule prevents the law of contract and the law of tort from dissolving one into the other.” (Ibid.)

However, tort damages have been permitted in contract cases where the contract was fraudulently induced. (See Robinson Helicopter Co., Inc. v. Dana Corp., supra, 34 Cal.4th at pp. 989-990.) This is because the duty that gives rise to tort liability is either completely independent of the contract or arises from conduct which is both intentional and intended to harm. (Id. at p. 990; see also Harris v. Atlantic Richfield Co. (1993) 14 Cal.App.4th 70, 78 [when one party commits a fraud during the contract formation or performance, the injured party may recover in contract and tort].) This exception would seem to apply as Plaintiffs’ claims are based on allegations that Ford fraudulently induced them to enter into a Retail Installment Sales Contract and Ford’s fraudulent performance of the parties’ agreement. (See FAC at ¶¶ 111, 167, 190, 215, and 216.) For purposes of demurrer, the court must accept these allegations as true. (See Olson v. Toy (1996) 46 Cal.App.4th 818, 823.) Thus, the economic loss rule is not applicable.

B. Statute of limitations

In the alternative, Ford argues that Plaintiffs’ fraud claims are barred by the applicable statutes of limitations. “Statute of limitations is the collective term applied to acts or parts of acts that prescribe the periods beyond which a plaintiff may not bring a cause of action.” (V.C. v. Los Angeles Unified School Dist. (2006) 139 Cal.App.4th 499, 509 [internal quotation marks omitted].) “A plaintiff must bring a claim within the limitations period after accrual of the cause of action.” (Id. at p. 510.) “Generally speaking, a cause of action accrues at the time when the cause of action is complete with all of its elements.” (Ibid. [internal quotation marks omitted].)

“The limitations period for a fraud cause of action is three years from accrual. However, the cause of action in that case is not deemed to have accrued until the discovery, by the aggrieved party, of the facts constituting the fraud.” (Doe v. Roman Catholic Bishop of Sacramento (2010) 189 Cal.App.4th 1423, 1430 [internal citation and quotation marks omitted].) Ford argues that Plaintiffs purchased their vehicle on June 3, 2006 but did not file their complaint until December 4, 2013, beyond the statutory three year period. Ford claims that, based on the face of the FAC, that Plaintiffs could have made discovery of the fraud before the three year period expired.

However, Plaintiffs allege that the statute of limitations has been tolled by the discovery rule, the doctrine of fraudulent concealment, equitable tolling, equitable estoppel, and tolling as established in American Pipe & Construction Co. v. Utah (1974) 414 U.S. 538. (See FAC at ¶¶ 28-109.) For example, “a defendant’s fraud in concealing a cause of action against him will toll the statute of limitations, and that tolling will last as long as a plaintiff’s reliance on the misrepresentations is reasonable.” (Grisham v. Philip Morris U.S.A., Inc. (2007) 40 Cal.4th 623, 637.) Having failed to address the sufficiency of these tolling allegations, the court is unable to decide the statute of limitations issue on demurrer.
Therefore, Ford’s demurrer to the first, second, third, and fourth causes of action for failure to state a claim is OVERRULED.

2. CLRA Cause of Action (Fifth)

With respect to the fifth cause of action [CLRA], Ford argues that the claim is barred by the three-year statute of limitations. (See Civ. Code § 1783 [CLRA is subject to three-year statute of limitations].) For the reasons stated above, the statute of limitations argument cannot be resolved on demurrer.

Alternatively, Ford argues that Plaintiffs fail to identify any actionable representation by the auto company to support the CLRA claim. In support, Ford cites to Daugherty v. American Honda Motor Co., Inc. (2006) 144 Cal.App.4th 824 where the plaintiffs alleged that defendant Honda failed to disclose an engine defect that could cause an oil leak malfunction long after the warranty period expired. The appellate court, in upholding dismissal after Honda’s successful demurrer, concluded that the plaintiffs could not state a failure to disclose claim under the CLRA. (Id. at p. 837.) Although a claim may be stated under the CLRA in terms constituting fraudulent omissions, the court held that, to be actionable, the omission must be contrary to a representation actually made by the defendant, or an omission of a fact the defendant was obliged to disclose. (Id. at p. 835.) In Daugherty, the plaintiffs did not allege any facts that would establish Honda was “bound to disclose” the engine defect. (Id. at pp. 827, 836.) Furthermore, nothing in the pleading showed that Honda made an omission that was contrary to a representation it made to plaintiffs. (Id. at p. 835.)

The current action is distinguishable from Daugherty in that Plaintiffs have alleged that Ford had a duty to disclose concealed facts regarding the truck’s engine. (See FAC at ¶¶ 33-37, 261.) This allegation is not disputed by Ford on demurrer. Thus, Daugherty is inapplicable. Moreover, where, as here, a defendant actively conceals a material fact from the plaintiff, at least one court has found that such an omission can support a claim under the CLRA. (Id. at ¶ 35; see Collins v. eMachines, Inc. (2011) 202 Cal.App.4th 249, 255-256.)

Therefore, Ford’s demurrer to the fifth cause of action for failure to state a claim is OVERRULED.

Motion to Strike Portions of the FAC

With respect to Ford’s motion to strike, the Notice of Motion seeks an order striking the following: (1) the words “and implied” in paragraph 288; (2) paragraph 292 in its entirety; and (3) paragraph 294 in its entirety. However, in substance, Ford is requesting that the sixth cause of action [violation of Song Beverly Act] be deemed untimely for failure to comply with the statute of limitations. (See Memo of P’s and A’s at p. 11.) To the extent that Ford seeks to strike the entire claim, the proper procedural vehicle is demurrer, not motion to strike. (See Quiroz v. Seventh Ave. Center (2006) 140 Cal.App.4th 1256, 1281 [it is improper for a court to strike a whole cause of action of a pleading under Code of Civil Procedure section 436]; see also Friends of Shingle Springs Interchange, Inc. v. County of El Dorado (2011) 200 Cal.App.4th 1470, 1483 [a party may object by demurrer on the ground that the pleading does not state facts sufficient to constitute a cause of action, including that the claims are barred by the applicable statutes of limitations].) Furthermore, as stated above, Plaintiffs have alleged sufficient facts of equitable tolling to preclude the statute of limitations defense that must be accepted as true on a motion to strike. (See FAC at ¶¶ 43-104.)

Accordingly, Ford’s motion to strike is DENIED.