Case Number: EC066985 Hearing Date: January 12, 2018 Dept: NCB

10. EC066985

THREE-SIXTY ADVISORY GROUP, LLC. v AIMEE SZIKLAI, et al

Demurrer

The Plaintiff alleges it hired the Defendant to be a managing director and chief administrative officer under a service agreement. The Defendant engaged in unauthorized transactions by which she converted the Plaintiff’s property and money to herself. The Defendant concealed these transactions by entering false information into the Plaintiff’s accounting program and by submitting fraudulent tax return information.

In addition, the Defendant breached the service agreement by failing to comply with a provision that required her to provide professional services only to the Plaintiff. The Defendant breached this provision by providing unauthorized services to a business that should have been a client for the Plaintiff.

CAUSES OF ACTION IN FIRST AMENDED COMPLAINT:

1) Breach of Contract

2) Fraud

3) Promissory Fraud

4) Conversion

This hearing concerns the demurrer filed by the Defendant, Aimee Sziklai. The Defendant argues that the second and third causes of action lack the particular facts needed to plead these fraud claims.

1. Demurrer to Second Cause of Action for Fraud

The second cause of action for fraud includes the following elements:

1) a representation, usually of fact, which is false;

2) knowledge of its falsity;

3) intent to defraud;

4) justifiable reliance upon the misrepresentation; and

5) damage resulting from that justifiable reliance

Stansfield v. Starkey (1990) 220 Cal. App. 3d 59, 72-73.

This cause of action is a tort of deceit and the facts constituting each element must be alleged with particularity; the claims cannot be saved by referring to the policy favoring liberal construction of pleadings. Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216. Since the claims must be pleaded with particularity, the complaint must allege facts showing how, when, where, to whom, and by what means the representations were tendered. Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73.

A review of the second cause of action reveals that does not plead any facts demonstrating that the Defendant made any false representation upon which the Plaintiff relied. The Plaintiff alleges in paragraphs 27 and 28 that the Defendant took the property and money through concealed transactions and that the Defendant knew she was not entitled to the property and money. In paragraph 29, the Plaintiff alleges that the Defendant intended to defraud the Plaintiff by making unauthorized credit care and bank transactions and by concealing the transactions by making false entries into the financial records.

There are no allegations that identify a representation that the Defendant made to the Plaintiff. There are no allegations that the Defendant knew her representation was false and that she made the representation to the Plaintiff with the intent to deceive the Plaintiff. There are no allegations demonstrating that the Plaintiff relied upon the representation and that damage resulted from its reliance. In order words, the Plaintiff has not pleaded any elements of a fraud claim.

Therefore, the Court sustains the demurrer to the second cause of action

The opposition papers reveal this confusion. On page 6, the Plaintiff argues that it has “clearly alleged its fraud allegations” by alleging that the Defendant engaged in a series of unauthorized credit card and bank transactions, by working for another company when she had agreed not to do so, and by requesting a loan. This is not a fraud claim; instead, it is a conversion claim, i.e., the wrongful taking of the Plaintiff’s property, and the breach of contracts, i.e., the work for another company in breach of a provision in the employment agreement. The request for a loan is the subject of the third cause of action for promissory fraud and it is analyzed below. None of the Plaintiff’s arguments demonstrate that the allegations that the Defendant converted money is a fraud claim.

It is possible to allege a false misrepresentations/or concealment pursuant to facts alleged in paragraphs 27 and 28 of the complaint. Accordingly the Court grants 20 days leave to amend.

2. Third Cause of Action for Promissory Fraud

In its third cause of action, the Plaintiff alleges that the Defendant requested a loan and then did not repay the loan. This claim for promissory fraud is a type of fraud based on false promises.

In order to plead a claim based on a false promise, the Plaintiff must plead facts that show the existence of two specific intentions of the Defendant: 1) an intention to cause the Plaintiff to act by reason of the promise, and 2) an intention at the time of the promise not to keep it. Hills Transp. Co. v. Southwest Forest Industries, Inc. (1968) 266 Cal.App.2d 702, 708. In pleading the tort, it is indispensable to set forth the falsity of the promise at the time it was tendered. Id. The allegations necessary to show contemporaneous intention not to perform should be clear, specific, and unequivocal. Id.

The Plaintiff alleges in paragraph 33 that the Defendant requested that the Plaintiff’s Chief Executive Officer, loan her $10,000 to pay for her tax liability and that the Defendant promised to repay the loan within a few weeks. In paragraph 35, the Plaintiff alleges that the Defendant never intended to repay the loan, that she falsely promised to repay the money, and that she has not repaid the loan.

The Plaintiff’s third cause of action lacks the clear, specific, and unequivocal allegations needed to plead that the Defendant had a contemporaneous intention not to perform. There are no allegations that plead that the Defendant had an intention at the time of the promise not to keep it. As a result, this cause of action is insufficient.

Therefore, the Court sustains the demurrer to the third cause of action. Since the defects identified above can be corrected by amendment, the Court grants 20 days leave to amend.