2014-00162318-CU-FR

Nabil Samaan vs. Folsom Buick GMC

Nature of Proceeding: Demurrer to Fourth Amended Complaint (Ally Financial, et al.)

Filed By: Givental, Alisa A.

*** If oral argument is requested, the parties must at the time oral argument is requested notify the clerk and opposing counsel of the specific causes of action that will be addressed at the hearing. Counsel are also reminded that pursuant to local rules, only limited oral argument is permitted on law and motion matters.

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The demurrer of Defendants Ally Financial, Inc. (“Ally Financial”), MIC Property and Casualty Insurance Corporation (“MIC”), and Ally Service Agreement Corporation fka GMAC Service Agreement Corporation (“Ally Service”) (collectively “Defendants”) to the Fourth Amended Complaint (“4AC”) is SUSTAINED IN PART and OVERRULED IN PART, without leave to amend, as follows.

The memorandum of points & authorities in opposition fails to comply with CRC Rule 3.1113(d)-(e).

Both moving and opposing papers fail to comply with CRC Rule 3.1110(b)(3)-(4).

The court did not consider the declaration which plaintiff filed in opposition to this demurrer since such extrinsic evidence is beyond the permissible scope of what may be considered in connection with a demurrer, which is limited to the facts alleged in the challenged pleading and those for which judicial notice is both requested and granted.

Factual Background

This case arises from plaintiff’s purchase of a GMC truck from a Roseville dealership in 2008. Plaintiff alleges he purchased a General Motors Protection Plan, Major Guard Insurance Policy (“GMPP”) at the same time. A copy of the GMPP is attached to the 4AC, identifying “GMAC Service Agreement Corporation” (i.e., Ally Service) as the “Provider” thereunder and MIC as a “California-approved insurance company” guaranteeing performance. Nonetheless, the dealership allegedly told plaintiff the GMPP was a contract with Ally Financial, not Ally Service. Plaintiff contends that Ally Financial, Ally Service and MIC are parent and subsidiary, undisclosed principals or agents, and/or otherwise affiliated with each other such that Ally Financial gave authority to Defendant Ally Service to handle claims made under the GMPP and to MIC to guarantee performance. Thus, according to plaintiff, Defendants are parties to this GMPP and are liable for a failure to perform after he sought vehicle repairs in 2012 at JS Folsom Automotive dba Folsom Buick GMC (“JSFA”), which plaintiff maintains is an agent of the other Defendants and an authorized service provider under the GMPP, thereby giving JSFA authorization to submit claims and invoices for payment under the GMPP.

Plaintiff had problems with the vehicle in 2012 and took it to JSFA for repairs, when JSFA allegedly indicated it was authorized to submit claims and make repairs under the GMPP. JSFA thereafter made repairs and issued invoices for payment by plaintiff even though JSFA had submitted claims for work it previously done on the truck pursuant to the GMPP. According to plaintiff, JSFA employee Shawn Vishney promised he would handle diagnostics, repairs and invoices in 2012 and these promises are part of oral and written agreements with JSFA, with the written portions being JSFA’s invoices. Plaintiff adds that JSFA did not properly diagnose problems with the vehicle, failed to submit invoices for his claims under the GMPP, forged plaintiff’s signature, wrongfully disposed of vehicle parts and engaged in other fraudulent conduct.

The 4AC spans nearly 250 pages including exhibits (e.g., deposition transcripts, discovery responses) and it purports to state several causes of action against the demurring Defendants including breach of contract (both written and oral), “fraud” (consisting of mixed allegations of false promise, concealment and misrepresentation) based on Defendants’ alleged agent JSFA’s conduct as well as Defendants’ own alleged promise to investigate JSFA’s fraud and to promptly reimburse plaintiff for covered repairs, negligence and violation of Business & Professions Code §17200 et seq., plus similar causes of action against JSFA.

Moving Papers. Defendants now demurs to all four causes of action alleged against them on various grounds, including but not limited to the 4AC’s admission that plaintiff has already been reimbursed for the $1,800 allegedly spent on vehicle repairs and its failure to allege any damages recoverable under the express terms of the GMPP or proximately caused by Defendants’ alleged conduct.

Opposition. Plaintiff opposes, arguing inter alia that the 4AC adequately plead recoverable damages with respect to each cause of action and that Defendants are barred from asserting arguments not limited to the element of damages.

Analysis

At the outset, it is important to note that in ruling on Defendants’ demurrer to the Third Amended Complaint (“3AC”) the court concluded plaintiff had failed to adequately allege the damages needed for each cause of action and thus, the court expressly declined to address a number of additional arguments advanced by Defendants. To the extent the court did not address such arguments, Defendants are not precluded from re-asserting those contentions in connection with this demurrer to the 4AC. However, Code of Civil Procedure §430.41(b) does preclude Defendants from demurring on any ground which could have been but was not raised in Defendants’ demurrers to the prior complaints.

Breach of Written Contract. The 4AC alleges plaintiff had with Ally Financial and Ally Service both a written and an oral contract, both of which were breached. The written contract is the GMPP, consisting of the brochure coupled with the selling dealership’s oral statements about the GMPP policy, and it is alleged to cover “virtually everything.” The oral contract is discussed below and in Paragraph 133, plaintiff asserts Defendants breached both agreements by failing to timely investigate and reimburse his claims, eventually providing reimbursement nearly 1½ years after plaintiff’s 2014 request for reimbursement and incurring a variety of damages including the loss of use of the $1,800 for roughly 18 months until finally reimbursed, the benefits the GMPP was to provide (e.g., rental vehicle for “covered” repairs), loss of use of the vehicle which was not properly repaired by JSFA (but later repaired by a third party), diminution in value of the vehicle JSFA failed to repair, loss of earnings for the time spent bringing the vehicle to JSFA for ongoing repairs, damage to his other vehicle which had to be used while repairs were performed, and expenses incurred in prosecuting this action including attorney fees and costs.

Defendants first argue that the claim for breach of written contract fails because the GMPP contains express prerequisites for reimbursement (e.g., authorization and inspection before repairs; notice of problems not promptly resolved by dealership) but plaintiff failed to allege his compliance with these requirements, instead relying on inadequate allegations he was excused from these obligations by virtue of his reliance on JSFA’s promise to seek authorization on his behalf and statements that the repairs were not covered under the GMPP and that without the requisite prior authorization for repairs, Defendants could not have breached the GMPP by failing to timely reimburse plaintiff. Defendants add that plaintiff has failed to allege facts sufficient to establish JSFA is Defendants’ agent, thereby precluding plaintiff from relying on JSFA’s words or conduct as an excuse for not complying with the prerequisites of the GMPP.

The court finds that these same or substantially similar arguments were not only made in connection with Defendants’ demurrer to the 3AC (sometimes “TAC”) but also expressly rejected, thereby precluding Defendants from re-arguing them here. The 11/7/2017 Ruling on Submitted Matter (“ROSM”) states in pertinent part:

The Fourth Cause of Action for Breach of Contract

…

Next, Defendants allege Samaan has not sufficiently alleged his own performance under the GMPP. In their view, because the GMPP expressly requires him to obtain authorization before obtaining any repairs under the GMPP, and because he does not allege he obtained such authorization, the fourth cause of action is defective.

The court disagrees. Samaan levels extensive allegations that Ally Financial and others have allowed repairs to be performed without the claimant’s request for prior authorization. These allegations present factual questions whether Defendants waived terms of the GMPP or agreed to their modification. That one or more exhibits to the TAC do not independently support theories of waiver of modification does not alter the conclusion. [Cite.] As a consequence, there is enough here to survive demurrer, and the court rejects Defendants’ contrary argument.

In a related argument, Defendants posit that Samaan was required to allege specific facts establishing his performance of each duty under the GMPP. Because performance need not be pled with specificity (see CCP § 457), the court disagrees.

…Defendants argue that, because Samaan alleges JSFA failed to submit invoices for covered repairs, their duty to fund the repairs was never triggered. (See TAC, ¶ 52.) This argument ignores allegations elsewhere that Samaan quickly notified Ally Financial and Ally Service of JSFA’s failures, to which Defendants promised an investigation that never occurred. (See Id. ¶¶ 53, 137.) Liberally construed, the allegations establish that Defendants were on notice of their contractual duty to pay but deliberately failed to do so. Hence, the court rejects Defendants’ first no-breach argument.

…

The Fifth Cause of Action for Fraud

…Defendants argue the fraud cause of action is defective for other reasons as well. First, because one claim within the fifth cause of action is based on misrepresentations JSFA allegedly made as Defendants’ agent, Defendants incorporate by reference JSFA’s demurrer to the fraud cause of action against it. In a concurrent ruling, the court rejects JSFA’s arguments. Defendants’ incorporation of the same arguments is unavailing.

Defendants further argue that the allegations do [not] establish JSFA’s employee’s authority to speak on their behalf. Whatever the merits of this argument, it ignores Samaan’s allegations that Defendants ratified JSFA’s misconduct. (See TAC, ¶¶ 53, 137, 140.) …
(Underline added for emphasis.)

In light of the foregoing, Defendants’ challenge to the sufficiency of plaintiff’s allegations about being excused from the obligation to obtain prior authorization for repairs, etc. need not be addressed here and regardless, since these allegations of the 4AC are unchanged from the 3AC, Defendants are by virtue of Code of Civil Procedure §430.41(b) precluded from making any new arguments about the sufficiency of the allegations that plaintiff is excused from performing certain obligations under the GMPP.

Defendants’ final contention regarding the breach of written contract claim is that the GMPP excludes coverage for all of the damages alleged by plaintiff except for the reimbursement of repair costs which the 4AC admits he already received. The GMPP

expressly states on Page 4, “[N]o benefits are available hereunder: …(m) For economic loss, including loss of time, inconvenience, lodging, food, storage or other incidental or consequential loss or damage…; (n) For diminution in VEHICLE value.” Based on this language, the court finds unavailing plaintiff’s allegations of contract damages in the form of loss of use of the $1,800 repair costs for roughly 18 months until finally reimbursed, the lack of a rental car, loss of use and/or diminution of the subject vehicle, loss of earnings, damage to his other vehicle, and expenses incurred in this action. Accordingly, the court will sustain Defendants’ demurrer to the written contract claim based on plaintiff’s failure to allege damages which are recoverable under the subject written contract, the GMPP.

Breach of Oral Contract. The oral contract alleged in the 4AC was made in 2014 when plaintiff contacted Ally Financial to complain about JSFA’s statements that his vehicle’s repairs were not covered and “Ally Financial/Ally Service orally promised to:

(1) investigate Plaintiff’s claims and (2) promptly reimburse Plaintiff for claims allowed under the GMPP.” (4AC, ¶130.) As noted above, Paragraph 133 asserts that as a result of Defendants’ failure to provide prompt reimbursement pursuant to the written and oral agreements, plaintiff suffered damages including the loss of use of the $1,800 for roughly 18 months until finally reimbursed, the benefits the GMPP was to provide ( e.g., rental vehicle for “covered” repairs), loss of use of the vehicle which was not properly repaired by JSFA (but later repaired by a third party), diminution in value of the subject vehicle, loss of earnings, damage to his other vehicle, and litigation expenses.

Defendants demur because the alleged oral promise to promptly investigate and reimburse plaintiff for claims covered by the GMPP is too uncertain as to the parties’ respective obligations thereunder and the remedy for any breach and because the damages claimed by plaintiff either were incurred prior to the alleged breach of oral contract and/or are not recoverable under the GMPP’s express terms. Defendants also assert that the 4AC fails to plead facts establish adequate consideration for the alleged oral promise in that plaintiff’s decision not to sue Defendants in reliance on their promise was not “bargained for,” thereby precluding it from constituting valid consideration for the oral promise. Finally, Defendants maintain that the only damage arguably caused by the breach of oral contract is the loss of use of the $1,800 for 1½ years but such damage are a consequence of JSFA’s alleged wrongdoing and these de minimis damages are outside the jurisdiction of the Superior Court.

The demurrer to the oral contract claim will be overruled. The promise attributed to Defendants is not too uncertain for enforcement and while there are no allegations as to the parties’ potential remedies for breach, the law is clear that a plaintiff may generally recover all reasonably foreseeable damages proximately caused by the other’s breach. While some of the alleged damages may have been incurred prior to Defendants’ alleged breach of the oral promise, this is not true with respect to all of the alleged damages including the loss of use of the $1,800 for the 18 months it took for Defendants to finally reimburse plaintiff and based on the allegations of the 4AC, the court does not find that the GMPP’s aforementioned limitations on recoverable damages are necessarily applicable to Defendants’ alleged oral promise to promptly investigate and reimburse plaintiff for any covered repair claims. Defendants’ argument about plaintiff’s failure to adequately plead the element of consideration misses the mark since they cited no authority for the proposition that “consideration” is an element which must be specifically pled but even if there were such authority, the court finds that plaintiff forbearance of exercising his right to sue Defendants is under

the circumstances sufficient to establish consideration for the alleged oral promise to promptly investigate and reimburse plaintiff for claims covered by the GMPP. Additionally, the 4AC adequately pleads that Defendants’ alleged breach of the promise to promptly investigate and reimburse plaintiff caused at least in part his alleged loss of use of the $1,800 for 1½ years until he was finally reimbursed. Finally, the court rejects the suggestion that it lacks subject matter jurisdiction over this case because the allegedly recoverable damages are de minimis damages and fall within the jurisdiction of the Small Claims Court inasmuch as the Superior Court is one of general jurisdiction and there is no requirement that a plaintiff plead or prove damages in excess of $7,500 in order to establish a Superior Court’s subject matter jurisdiction. (See, e.g., Code Civ. Proc. §§88-89.)

In light of the foregoing, the court need not address Defendants’ additional argument regarding the 4AC’s “alluding to” the existence of another oral contract between plaintiff and Defendants by virtue of the dealership originally selling the GMPP at issue in this case.

“Fraud.” As against demurring Defendants, this cause of action consists of two primary claims: (1) JSFA is an agent of Defendants and the latter are therefore liable for the former’s alleged fraud (4AC, ¶¶149-156), and (2) Defendants’ own alleged fraud (consisting of mixed allegations of false promise, concealment and misrepresentation) by failing to investigate plaintiff’s complaint about the repairs to his vehicle not being covered by the GMPP and to promptly reimburse plaintiff for any past repairs found to be covered (4AC, ¶¶157-179). In Paragraphs 177-179, the 4AC alleges the same damages claimed in connection with the contract causes of action ( i.e., loss of use of $1,800 for 18 months, loss of use and diminution in value of the subject vehicle, damage to another vehicle, loss of earnings, and expenses incurred in prosecuting this action.

Defendants first insist plaintiff incorrectly alleges JSFA’s ability to submit claims under the GMPP creates an agency relationship rendering Defendants liable for JSFA’s mishandling of plaintiff’s claims and of repairs to the vehicle inasmuch the 4AC fails to establish that Defendants had the “right to control” the alleged agent and the allegations actually demonstrate the absence of control over the alleged agent, JSFA.

The court finds that this same or a substantially similar argument was already rejected in connection with Defendants’ demurrer to the 3AC, thereby precluding Defendants from re-asserting it here. The 11/7/2017 ROSM states in pertinent part:

The Fifth Cause of Action for Fraud

…Defendants argue the fraud cause of action is defective for other reasons as well. First, because one claim within the fifth cause of action is based on misrepresentations JSFA allegedly made as Defendants’ agent, Defendants incorporate by reference JSFA’s demurrer to the fraud cause of action against it. In a concurrent ruling, the court rejects JSFA’s arguments. Defendants’ incorporation of the same arguments is unavailing.

Defendants further argue that the allegations do [not] establish JSFA’s employee’s authority to speak on their behalf. Whatever the merits of this argument, it ignores Samaan’s allegations that Defendants ratified JSFA’s misconduct. (See TAC, ¶¶ 53, 137, 140.) Absent points and authorities

demonstrating that this ratification theory is legally insufficient, the court will not rule out fraud based on JSFA’s alleged misrepresentations.
(Underline added for emphasis.)

Moreover, because the current allegations of fraud against Defendants’ based on an agency relationship with JSFA appear unchanged from the 3AC, Defendants are by virtue of Code of Civil Procedure §430.41(b) precluded from now asserting this new argument which could have been but was not raised in the previous demurrer.

Defendants also contend the 4AC fails to plead a valid fraud claim as against JSFA for the reasons set forth in JSFA’s own demurrer, rendering moot plaintiff’s agency theory of fraud as against Defendants. The demurrer on this ground is also overruled since JSFA’s own demurrer to the fraud cause of action in the 4AC has been overruled.

Defendants further argue that plaintiff’s remaining fraud claim based on the former’s alleged false promise to investigate and reimburse the latter for any repairs covered under the GMPP claims is not pled with the requisite heightened particularity for fraud (including the name of the person who made the promise and his/her authority to speak on behalf of Defendants), does not adequately alleged Defendants’ knowledge of falsity or intent to defraud, and does not adequately plead the causal connection between plaintiff’s reliance and the damages claimed as a result of this reliance, especially since a majority of the claimed damages had already occurred and the loss of use of the $1,800 did not result from plaintiff’s reliance on the alleged promise to investigate and reimburse.

The demurrer to this fraud claim will be overruled as well. Although the 4AC does not identify the individual who allegedly made the oral promise to promptly investigate and reimburse or his/her authority to speak on behalf of Defendants as would ordinarily be required to plead fraud, Paragraph 170 also alleges Defendants had an independent duty to investigate and reimburse plaintiff for covered claims and therefore, the 4AC’s failure to identify the individual making the oral promise and/or his/her authority is not fatal to this fraud claim against Defendants based on their own conduct. Likewise, the court rejects Defendants’ claim that the 4AC fails to adequately plead their knowledge of falsity or their intent to induce reliance as the allegations in Paragraph 171 are sufficient to withstand demurrer. Finally, although it does appear that a number of the damages claimed by plaintiff were not proximately caused by plaintiff’s alleged reliance on Defendants’ false promises, the court finds that the 4AC adequately pleads a causal connection to some of the damages including the loss of use of the $1,800 since, if Defendants had fulfilled their alleged obligation to promptly investigate and reimburse plaintiff for claims covered under the GMPP, it would not have taken roughly 18 months for plaintiff to ultimately receive his reimbursement. As at least one item of recoverable damages has been pled, the Court need not consider here whether any or all of the other items of damage may be recoverable.

Negligence. This cause of action is alleged against defendant Ally Financial only and is largely unchanged from the prior complaint, with the notable exception of the new allegations in Paragraphs 202-205 regarding plaintiff’s damages (which are now the same as those asserted in connection with the preceding causes of action) and a slight revision to the allegations Paragraph 201. The negligence claim asserts in part that the failure to investigate and promptly pay plaintiff’s claims under the GMPP in violation of Ally Financial’s contractual and statutory obligations constitutes a breach of the applicable standard of care but the court rejected this contention in response to

Defendants’ demurrer to the prior complaint. However, the court remained unconvinced that plaintiff’s remaining allegations about Ally Financial’s failure to investigate the claimed fraud by its alleged agent, JSFA, were insufficient as a matter of law to establish an actionable breach of duty of care owed by Ally Financial but the court held that this part of the negligence cause of action was nevertheless deficient because the 3AC failed to plead (1) facts establishing that Ally Financial’s failure to investigate JSFA’s alleged misconduct contributed to any damages and (2) plaintiff suffered any recoverable damages.

Defendants again demur to the negligence cause of action on the ground that Ally Financial’s alleged breach of its contractual and statutory obligations do not give rise to a duty of care upon which a negligence cause of action may be based. The court agrees for the reasons cited in the ruling on the prior demurrer.

Defendants remaining contentions with respect to the negligence claim are that plaintiff has still failed (1) to identify a breach by Ally Financial of any duty of care owed to plaintiff since at most Ally Financial merely took too long to investigate and (2) none of the alleged damages are attributable to the alleged delay. Because the court finds that the new allegations in Paragraphs 201-202 are sufficient to cure the two deficiencies in the negligence cause of action alleged in the 3AC, the present demurrer to the negligence cause of action shall be overruled.

B&P Code §17200 et seq. This cause of action levies a variety of allegations against the demurring Defendants including violation of Insurance Code §12850, making false or misleading representations to the public including plaintiff, and violation of various California laws relating to the sale of service contracts and performance of obligations thereunder. (4AC, ¶¶215-221.) Beginning with Paragraph 222, the 4AC alleges that plaintiff has been denied coverage under the GMPP as a result of the unlawful practices of Defendants and has suffered a variety of damages consisting of those cited in connection with the preceding causes of action (i.e., loss of use of the $1,800 for 18 months until reimbursed, loss of use and diminution in value of the subject vehicle which was not properly repaired by JSFA, damage to his other vehicle, loss of earnings, litigation expenses, etc.)

Defendants demur to this cause of action on the grounds that (1) all of the charging allegations are either false given the GMPP’s express terms, contrary to existing law or unsupported by the facts pled in the 4AC and (2) plaintiff lacks standing to bring a claim under §17200 because he has not suffered an economic injury as a result of the demurring Defendants’ alleged unfair business practices given that plaintiff has been fully reimbursed for all repairs covered by the GMPP despite JSFA’s failure to earlier submit them for payment.

Coupled with the fact that this final cause of action is not pled with the factual particularity required of all statutory causes of action (see, e.g., Covenant Care, Inc. v. Superior Court (Inclan) (2004) 32 Cal.4th 771, 790 (citing Lopez v. Southern Cal. Rapid Trans. Dist. (1985) 40 Cal.3d 780, 795) [statutory claims must be pleaded with particularity, showing every fact essential to the existence of liability under the relevant statute]), the court finds this §17200 claim is deficient in that plaintiff has fails to plead facts sufficient to demonstrate he suffered an economic injury within the meaning of the statute as a proximate result of the demurring Defendants’ own alleged unfair business practices (as opposed to JSFA’s alleged failure to submit the invoices for reimbursement) in light of the admission plaintiff has been fully reimbursed for all

repairs covered by the GMPP. Accordingly, the demurrer to the §17200 cause of action must be sustained.

Conclusion

For the reasons explained above, Defendants’ demurrer to the Breach of Written Contract and Business & Professions Code §17200 causes of action are sustained while the demurrer to the other causes of action alleged against Defendants are overruled.

Leave to amend is denied since plaintiff has already had five opportunities to plead his causes of action in this case.

If not already done, demurring Defendants to file and serve an answer to the remainder of the 4AC within 10 days.