Case Number: 19STCV00034 Hearing Date: June 18, 2019 Dept: 37

HEARING DATE: June 18, 2019

CASE NUMBER: 19STCV00034

CASE NAME: Maxwell Benson v. Vishal Uttamchandai

TRIAL DATE: None

SERVICE: OK

DEFENDANTS DEMURRER TO PLAINTIFF’S SECOND AMENDED COMPLAINT

PROCEEDING: Demurrer to Plaintiff’s Second Amended Complaint

MOVING PARTY: Defendant Vishal Uttamchandai

OPPOSING PARTY: Plaintiff Maxwell Benson

OPPOSITION: Timely filed on May 14, 2019

REPLY: Timely filed as of June 7, 2019

TENTATIVE: The court SUSTAINS the demurrer to the second and third cause of action with twenty days leave to amend. Defendant’s counsel to give notice.

Background

This action case arises in connection to a series of written agreements between Plaintiff and Defendant concerning the exchange of money for cryptocurrencies, such as Bitcoin and Etherium (SAC at ¶¶ 14-22.). Plaintiff alleges that starting on December 14, 2017, Plaintiff paid Defendant certain sums of cash in exchange for Defendant’s promise to repay Defendant on a future date with cryptocurrencies. (Id. Exhibit A, B.) Plaintiff alleges that after paying Defendant the amount agreed upon, Defendant defaulted on the contract by failing to repay Plaintiff. According to the FAC, Defendant currently owes Plaintiff 22.125 Bitcoin and 48.25 Etherium (Id. ¶ 18.).

On January 3, 2019, Plaintiff filed a complaint against Defendant for the following causes of action: (1) breach of contract; (2) breach of duty of good faith and fair dealing; (3) promissory fraud; and (4) conversion. On February 6, 2019, Defendant filed a demurrer to the second and third causes of action in Plaintiffs complaint. The demurrer was set to be heard on April 10, 2019.

On March, 14, 2019, however, Defendant filed a second demurrer to Plaintiff’s first amended complaint.[1] On March, 22, 2019 filed the first amended complaint, as well as, a second amended complaint (“SAC”).[2]

Defendant now demurs to the second and third causes of action in the SAC on the grounds that the SAC fails to allege sufficient facts to constitute a cause of action upon which relief can be granted. Defendant also specially demurs to third cause of action on the grounds of uncertainty.

Meet and Confer

A party filing a demurrer “shall meet and confer in person or by telephone with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer.” (Code Civ. Proc., § 430.41, subd. (a).) “The parties shall meet and confer at least five days before the date the responsive pleading is due. If the parties are not able to meet and confer at least five days prior to the date the responsive pleading is due, the demurring party shall be granted an automatic 30-day extension of time within which to file a responsive pleading, by filing and serving, on or before the date on which a demurrer would be due, a declaration stating under penalty of perjury that a good faith attempt to meet and confer was made and explaining the reasons why the parties could not meet and confer.” (Code Civ. Proc., § 430.41, subd. (a)(2).)

Defendant submits the Declaration of Attorney Michael B. Wilson in support of Defendant’s demurrer. Wilson attests that on April 15, 2019, he mailed a letter to Plaintiff Pro Se Maxwell Benson that outlined the legal basis for Defendant’s demurrer to Plaintiff’s FAC. (Wilson Decl. ¶ 2.) Wilson further attests that the letter invited Plaintiff to call him to discuss the basis of the demurrer and that Plaintiff has not called him in response. (Ibid.) This declaration is sufficient to satisfy the meet and refer requirement. (Code Civ. Proc., §§ 430.41, subd. (a)(3)(A)
DISCUSSION

I. 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.) A demurrer tests the pleadings alone and not the evidence or other extrinsic matters; therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed. (Code Civ. Proc., §§ 430.30, 430.70.) When considering demurrers, courts read the allegations liberally and in context. (Taylor v. City of Los Angeles Dept. of Water and Power (2006) 144 Cal.App.4th 1216, 1228.) The general rule is that the plaintiff need only allege ultimate facts, not evidentiary facts. (Doe v. City of Los Angeles (2007) 42 Cal.4th 531, 550.) The court “treat[s] the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law….” (Berkley v. Dowds (2007) 152 Cal.App.4th 518, 525 (Berkley).) “When a court evaluates a complaint, the plaintiff is entitled to reasonable inferences from the facts pled.” (Duval v. Board of Trustees (2001) 93 Cal.App.4th 902, 906.)

“All that is required of a plaintiff, as a matter of pleading … is that his complaint set forth the essential facts of the case with reasonable precision and with sufficient particularity to acquaint the defendant with the nature, source and extent of his cause of action.” (Rannard v. Lockheed Aircraft Corp. (1945) 26 Cal.2d 149, 156-157.) Demurrers do not lie as to only parts of causes of action where some valid claim is alleged but “must dispose of an entire cause of action to be sustained.” (Poizner v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 119.) “Generally it is an abuse of discretion to sustain a demurrer without leave to amend if there is any reasonable possibility that the defect can be cured by amendment.” (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349.)
II. Analysis
A. Breach of Duty of Good Faith and Fair Dealing

Defendant demurs to the second cause of action for breach of duty of good faith and fair dealing on the grounds that the second cause of action is superfluous and a mere restatement of Plaintiff’s breach of contract claim.

‘“Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement.”’ [] The covenant of good faith finds particular application in situations where one party is invested with a discretionary power affecting the rights of another. Such power must be exercised in goodfaith.” (Carma Developers (Cal.), Inc. v. Marathon Development California, Inc. (1992) 2 Cal.4th 342, 371–372, internal citations omitted.)

There is an implied covenant of good faith and fair dealing in every contract that neither party will do anything which will injure the right of the other to receive the benefits of the agreement.” (Comunale v. Traders & General Ins. Co. (1958) 50 Cal.2d 654, 658.)

If allegations in action based on breach of implied covenant of good faith and fair dealing do not go beyond statement of mere contract breach, and, relying on same alleged acts, complaint simply seeks same damages or other relief already claimed in companion contract cause of action, allegations may be disregarded as superfluous as no additional claim is actually stated; thus, absent those limited cases where breach of consensual contract term is not claimed or alleged, only justification for asserting separate cause of action for breach of implied covenant is to obtain tort recovery. (Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1395.)

Here, Plaintiff’s second cause of action for breach of duty of good faith and fair dealing seeks to hold defendant liable for allegedly failing to perform under the purported contracts. (Dem. Opp. at pp. 3-5.) This theory of liability relies on the same factual allegations set forth in Plaintiff’s breach of contract claim. (SAC ¶¶ 28-34.) Furthermore, the breach of duty of good faith and fair dealing claim seeks the same damages as those sought for Plaintiff’s breach of contract claim. (Ibid.) Therefore, the second cause of action for breach of duty of good faith and fair dealing is unnecessary and superfluous.

Accordingly, the demurrer to the second cause of action for breach of implied covenant of good faith and fair dealing is SUSTAINED with twenty days leave to amend.
B. Promissory Fraud

Defendant also demurs to the third cause of action for promissory fraud on the grounds that the SAC fails to state sufficient facts to constitute a cause of action upon which relief can be granted. Defendant also specially demurs to the third cause of action for promissory fraud on the grounds of uncertainty.

“‘Promissory fraud’ is a subspecies of the action for fraud and deceit. A promise to do something necessarily implies the intention to perform; hence, where a promise is made without such intention, there is an implied misrepresentation of fact that may be actionable fraud.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.) The elements of promissory fraud (i.e., of fraud or deceit based on a promise made without any intention of performing it) are: (1) a promise made regarding a material fact without any intention of performing it; (2) the existence of the intent not to perform at the time the promise was made; (3) intent to deceive or induce the promisee to enter into a transaction; (4) reasonable reliance by the promisee; (5) nonperformance by the party making the promise; and (6) resulting damage to the promise. (Muraoka v. Budget Rent–A–Car (1984) 160 Cal.App.3d 107, 119.)

Fraud must be pled in the complaint specifically. General and conclusory allegations are not sufficient. (Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 74; Nagy v. Nagy (1989) 210 Cal.App.3d 1262, 1268.) Unlike most causes of action where the “the policy of liberal construction of the pleadings,” fraud requires particularity, that is, “pleading facts which show how, when, where, to whom, and by what means the representations were tendered.” (Stansfield, supra, 220 Cal.App.3d at 73; Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.) Every element of a fraud cause of action must be alleged both factually and specifically. (Hall v. Department of Adoptions (1975) 47 Cal.App.3d 898, 904; Cooper v. Equity General Insurance (1990) 219 Cal.App.3d 1252, 1262.)

Here, Plaintiff’s SAC fails to satisfy the heightened specificity requirement when pleading their third cause of action for promissory fraud. The SAC alleges that Defendant committed fraud because at the time the parties entered into the contract, Defendant had the intention not to perform. (Dem. Opp. at p. 5-6.) The allegations in the SAC, however, claiming that “defendant defrauded plaintiff on or about December 14, 2017 and during subsequent dates” and that “Defendants made the representations with the intent to defraud the Plaintiff” are not pled with sufficient particularity. (SAC ¶¶ 36, 37.) These allegations lack details necessary details such as “how, when, where, to whom, and by what means the representations were tendered.” In addition, the SAC does not allege specific facts about Defendant’s intention when making the representations to Plaintiff or whether Plaintiff’s reliance on Defendant’s representation is justifiable.

Accordingly, Defendants demurrer to the third cause of action for promissory fraud is SUSTAINED with twenty days leave to amend.

[1] Plaintiff served Defendant with the first amended complaint on February 12, 2019. However, Plaintiff did not file the complaint with the court until March 22, 2019.

[2] Plaintiff’s first amended complaint was properly and timely filed with the court on March 22, 2019. (Code Civ Proc. § 472.) Plaintiff’s second amended complaint was improperly filed because Plaintiff did not obtain leave of the court. However, Defendant does not object to the improper filing and the parties appear to have agreed to using the second amended complaint. Accordingly, the court will treat the second amended complaint as the operative first amended complaint.