2018-00233023-CU-BC

Siroos Saifi vs. Tnik Riverpoint Capital, Inc.

Nature of Proceeding: Hearing on Demurrer

Filed By: Bolls, III, R. David

Defendants Tnik Riverpoint Capital, Inc., Harpinder Singh Khara, and Matt Brown’s demurrer to Plaintiff Siroos Saifi’s complaint is ruled upon as follows.

In this action Plaintiff alleges causes of action for breach of contract, fraud, conspiracy to commit fraud and negligence. The allegations arise out of an alleged written “Finder’s Fee Agreement” (Agreement) between Plaintiff and Defendant Khara whereby Defendant Khara allegedly agreed to pay Plaintiff $25,000 to find an owner of real estate willing to sell real property to Defendant Khara.

Defendants demur to all causes of action except the first cause of action for breach of contract.

Second Cause of Action (Fraud-Against Defendant Khara)

Defendant Khara’s demurrer is overruled.

The elements of fraud “are (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.)

When pleading a claim for fraud/negligent misrepresentation, each and every element must be alleged, “and the facts constituting the fraud must be alleged with sufficient specificity to allow defendant to understand fully the nature of the charge made.” ( Stansfield v Starkey (1990) 220 Cal.App.3d 59, 73; Cadlo v Owens-Illinois, lnc. (2004) 125 Cal.App.4th 513,519 (stating that “[e]ach element in a cause of action for fraud or negligent misrepresentation must be factually and specifically alleged”). To satisfy the particularity requirement, the plaintiff must plead facts which “show how, when, where, to whom, and by what means the representations were tendered.” (Stansfield, supra, 220 Cal.App.3d at p. 74; see also Lazar v Superior Court (1996) 14 Cal.4th 631, 645.) Also, when asserting a fraud /negligent misrepresentation claim against an entity, plaintiff must “‘allege the names of the persons who made the allegedly fraudulent misrepresentation, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written.'” Lazar, supra, 12 Cal.4th at p. 645 (quoting Tarmann v State Farm Mut Auto Ins Co (1991) 2 Cal.App.4th 153, 157).

Plaintiff alleges that Defendant Khara represented that he intended to pay the $25,000 finder’s fee called for in the Agreement. (Comp. ¶ 15.) Plaintiff alleges that the representation was false and that Defendant Khara’s true intent was to never pay the fee. (Id. ¶ 16.) Khara executed the Agreement on February 2, 2017. (Id. ¶ 8, Exh. A.) Plaintiff alleges that Defendant Khara concealed his intent in order to induce Plaintiff to enter into the Agreement and that he would not have done so had he known Defendant Khara never intended to pay the finder’s fee. (Id. ¶ 18.)

According to Defendant, the allegations lack the requisite specificity for a fraud cause of action. Defendant argues that Plaintiff’s allegations are conclusory.

The Court finds the allegations against Defendant Khara are sufficient. Plaintiff’s allegations demonstrate that Defendant Khara falsely represented that he would pay the finder’s fee called for in the Agreement. The false representation was allegedly made by Defendant by entering the Agreement which stated that Defendant would pay the fee. The Agreement was allegedly executed by Defendant on February 2, 2017. While Plaintiff argues in opposition that the Agreement was transmitted to him by email, no such allegation exists in the complaint. The absence of that allegation, however, does not render the cause of action insufficiently specific. Regardless of how the Agreement was sent to Plaintiff, the allegations show that Defendant made a specific representation in a specific document, the Agreement, on a specific date and Plaintiff thereafter executed the Agreement in reliance on Defendant’s alleged false representation. Plaintiff has sufficiently alleged facts showing the “how, when, where, to whom, and by what means” the alleged fraud was accomplished.

Defendant argues that if Plaintiff’s allegations were sufficient, every breach of contract cause of action would be subject to an additional cause of action for fraud simply by alleging that a party made a false representation by entering an agreement. With respect to false promise, it is sufficient for pleading purposes to allege “(1) the defendant made a representation of intent to perform some future action, i.e., the defendant made a promise, and (2) the defendant did not really have that intent at the time the promise was made, i.e,, the promise was false.” (Beckwith v. Dahl (2012) 205 Cal.App.4th 1039, 1060.) The falsity of the promise “is sufficiently pled with a general allegation the promise was made without an intention of performance.” (Id.) Here Plaintiff alleged that Defendant falsely promised he would pay the finder’s fee with no intention of performing. This is a sufficient allegation of a material misrepresentation and it is irrelevant for purposes of the instant demurrer whether Plaintiff can prove Defendant had no intention of performing. It is true that something more than nonperformance is required to prevail on a promissory fraud cause of action, but the burden to prove wrongful intent is an evidentiary burden, not a pleading burden.

Defendant also argues that since Plaintiff has alleged the same damages in his fraud cause of action as he did in his breach of contract cause of action he cannot show any damage by any false representation. However, the fraud and breach of contract causes of action are essentially alternate and inconsistent theories. “When a pleader is in doubt about what actually occurred or what can be established by the evidence, the modern practice allows that party to plead in the alternative and make inconsistent allegations.” (Mendoza v. Continental Sales Co. (2006) 140 Cal.App.4th 1395, 1402.) While Defendant does not specifically reference the “economic loss rule”, the Court simply notes that the economic loss rule does not apply to a cause of action for fraudulent inducement such as this one. (See, Robinson Helicopter Co., Inc., supra, 34 Cal.4th at 990; see also Erlich v. Menezes (1999) 21 Cal.4th 543, 551-552.) In some instances, the economic loss rule bars a tort action in the absence of personal injury or physical damage to property. (Robinson Helicopter Co. supra, at p. 984.) “The economic loss rule requires a purchaser to recover in contract for purely economic loss due to disappointed expectations, unless he can recover harm above and beyond a broken contractual promise.” (Id. at 988.) As noted, the rule does not apply to a cause of action for fraudulent inducement.

The demurrer to the second cause of action is overruled.

Third Cause of Action (Fraud-Against Defendants Tnik Riverpoint and Brown)

Defendants Tnik Riverpoint and Brown’s demurrer is sustained with leave to amend for failure to state facts sufficient to constitute a cause of action.

With respect to these two defendants, Plaintiff alleged that Tnik was the real estate broker representing Defendant Khara in the real estate transaction that was the subject of the Agreement. (Comp. ¶ 23.) Brown was alleged to be the real estate agent. (Id.) Plaintiff alleged that Defendants made an intentional misrepresentation to him as follows: “by presenting the Agreement to Plaintiff for his signature, represented to Plaintiff that the Agreement was a valid, appropriate and beneficial agreement for Plaintiff to enter into under the facts and circumstances existing at the time that Plaintiff entered into the Agreement.” (Id.) He alleged that Defendants knew that the Agreement was not a valid finder’s fee agreement because at the time the Agreement was entered Plaintiff had already participated in previous negotiations involving the subject real estate transaction and had forfeited any finder’s fee.

While the second cause of action for fraud against Defendant Khara was sufficient, the instant cause of action is not sufficiently pled. The vague allegations that Defendants, “by presenting the Agreement to Plaintiff” represented that the Agreement was “valid, appropriate and beneficial” is not sufficiently specific. As opposed to the second cause of action where it was alleged that Defendant Khara made a specific representation in the Agreement that he signed, the vague representation by Defendants does not relate to a specific representation in the Agreement. These Defendants are not even referred to in the Agreement. (Comp. Exh. A.) Further there are no details as to what Defendants actually said, or how they conveyed this vague representation to Plaintiff, other than by simply alleging it was presented to him. There are no dates as to when Defendants made their representation, of how it was made.

The demurrer to this challenged cause of action is sustained with leave to amend.

Leave to amend is given as this is the first challenge to the complaint.

Fourth Cause of Action (Conspiracy to Commit Fraud-All Defendants)

Defendants’ demurrer is overruled.

Conspiracy is not a cause of action, but a legal doctrine that imposes liability on persons who, although not actually that imposes liability on persons who, although not actually committing a tort themselves, share with the immediate tortfeasors a common plan or design.” (Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 510-511.) “The conspiring defendants must have actual knowledge that a tort is planned and concur in the tortious scheme with knowledge of its unlawful purpose. ( Kidron v. Movie Acquisition Corp. (1995) 40 Cal.App.4th 1571, 1582.) “The elements of a civil conspiracy are ‘(1) the formation and operation of the conspiracy; (2) the wrongful act or acts done pursuant thereto; and (3) the damage resulting.’” (Mosier v. Southern Cal.Physicians Ins. Exch. (1998) 63 Cal.App.4th 1022, 1048.)

Here, Defendants argue that the conspiracy claim fails because not only is it not a cause of action, but the underlying fraud claims fail. However, as set forth above, while the Court sustained the demurrer to the third cause of action for fraud against Defendants Tnik Riverpoint and Brown, the Court overruled the demurrer to the second cause of action for fraud against Defendant Khara. Defendants Tnik

Riverpoint and Brown are alleged to have conspired with Defendant Khara.

Defendants then argue that even if the fraud causes of action were sufficiently pled, this claim fails because Plaintiff alleged that Brown was the agent/employee of Tnik Riverpoint and a corporation cannot conspire with its agents. (Applied Equipment Corp., supra, 7 Cal.4th at 512.) While this point of law is valid, Plaintiff alleged that Defendants Khara, Brown and Tnik Riverpoint conspired with each other and Defendant Khara is not alleged to be an agent of Tnik Riverpoint. Thus the conspiracy claim is not limited to a claim that Brown and Tnik Riverpoint conspired with each other but rather that Brown and Tnik Riverpoint conspired with Defendant Khara.

The demurrer is therefore overruled.

Fifth Cause of Action (Negligence-Against Defendants Tnik Riverpoint and Brown)

Defendants’ demurrer is overruled.

Plaintiff alleged that Defendants advised Plaintiff to enter the Agreement and thus owed him a duty of care. (Comp. ¶ 36.) Plaintiff alleged that Defendants breached that duty by presenting him the Agreement and advising him to enter the Agreement even though as real estate professionals they knew or should have known that Plaintiff had already forfeited the finder’s fee called for in the Agreement as he had already participated in negotiations involving the subject real estate transaction. (Id. ¶ 37.)

Defendants argue that they owe no duty of care to a finder. Generally, a real estate agent or broker does not owe a legal duty to anyone who is not a party to the real property transaction. “The existence of a duty here arises in the context of a real estate transaction. Real estate brokers are subject to two sets of duties: those imposed by regulatory statutes, and those arising from the general law of agency.” ( Coldwell Banker Residential Brokerage Co. v. Superior Court (2004) 117 Cal.App.4th 158, 164.) Generally, such duties are not extended to non-parties to the real estate transaction. (Id. at 165-168; FSR Brokerage, Inc. v. Superior Court (1995) 35 Cal.App.4th 69, 71-74 [broker involved in sale of house owed no duties to guests injured at a party at the house for failure to disclose].)

Defendants argue that Plaintiff is not attempting to enforce an obligation premised on either a regulatory statue or the general law of agency. They argue that there is no contractual privity between the parties and no allegation that Defendants undertook to represent him.

However, Plaintiff alleged that Defendants affirmatively advised him with respect to signing the Agreement. The lack of any privity between the parties is not fatal to a finding of duty. “It seems relevant to us, in this regard, that the duty to disclose that which should be known is a formally acknowledged professional obligation that it appears many brokers customarily impose upon themselves as an ethical matter. Thus, the Code of Ethics of the National Association of Realtors includes, inter alia, the provision that a broker must not only ‘avoid…concealment of pertinent facts,’ but ‘has an affirmative obligation to discover adverse factors that a reasonably competent and diligent investigation would disclose.’ [citation omitted] This implicit duty of all real estate agents, regardless whether they are members of the aforementioned association and bound by its Code of Ethics, is reflected in the law.” (Easton v. Strassburger (1984) 152 Cal.App.3d 90, 100-101 [emphasis in original].) While that case involved a duty to investigate found to be owed by the seller’s broker to a buyer,

it does show that privity is not required as the buyer was not in privity with the seller’s broker. Moreover, the allegations here are that Defendants advised Plaintiff regarding the Agreement. Thus despite Defendants’ status, they allegedly undertook to advise Plaintiff with respect to entering the Agreement and at least for pleading purposes assumed a duty with respect to that advice.

The demurrer on the basis that no duty was owed is overruled.

In short, the demurrer is overruled as to the second, fourth and fifth causes of action and sustained with leave to amend as to the third cause of action.

Where leave was given, Plaintiff may file and serve an amended complaint no later than December 3, 2018. Defendants shall file and serve their response within 30 days thereafter, 35 days if the amended complaint is served by mail as modified by the CCP § 430.41 extension if necessary.

This minute order is effective immediately. No formal order pursuant to CRC rule 3.1312 or other notice is required.