TOM AMESBURY et al vs. BARBARA HEGER et al

Legal Standard

On demurrer, a court's function is limited to testing the legal sufficiency of the complaint. Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 113-114. In determining a demurrer, the court assumes the truth of the facts alleged in the complaint and the reasonable inferences that may be drawn from those facts. Miklosy v. Regents of the Univ. of Cal. (2008) 44 Cal.4th 876, 883. A court must determine if the factual allegations of the complaint are adequate to state a cause of action under any legal theory. Barquis v. Merchants Collection Assn. (1972) 7 Cal.3d 94, 103.

Contentions, deductions and conclusions of law, however, are not presumed as true. Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 967. A plaintiff is not required to plead evidentiary facts supporting the allegation of ultimate facts; the pleading is adequate if it apprises the defendant of the factual basis for the plaintiff's claim. Perkins v. Superior Court (1981) 117 Cal.App.3d 1, 6. A demurrer is not the appropriate procedure for determining the truth of disputed facts. Fremont Indemnity Co., 148 Cal.App.4th at 113-114.

“If a complaint does not state a cause of action, but there is a reasonable possibility that the defect can be cured by amendment, leave to amend must be granted.” Milligan v. Golden Gate Bridge Highway & Transportation Dist. (2004) 120 Cal.App.4th 1, 6.

Analysis

First Cause of Action – Negligence:

Defendant argues the complaint fails to plead facts sufficient to constitute a negligence claim against Heger as Trustee, because no duty is owed by a Trustee as a seller of trust property and a Trustee does not owe professional or operational duties as alleged, and that the economic loss rule bars the negligence claim. The court disagrees.

The elements of a cause of action for negligence are well established. Plaintiff must show: (a) a legal duty to use due care; (b) a breach of such legal duty; and that (c) the breach was the proximate or legal cause of the resulting injury. Ladd v. County of San Mateo (1996) 12 Cal.4th 913, 917. A breach is the failure to meet the standard of care, and the element of causation requires there be a connection between the defendants’ breach and the plaintiff’s injury. Coyle v. Historic Mission Inn Corp. (2018) 24 Cal.App.5th 627, 643.

When a “seller knows of facts materially affecting the value or desirability of the property” that are “known or accessible only to him” and also knows the facts are not otherwise known or “within the reach of the diligent attention and observation of the buyer, the seller is under a duty to disclose them to the buyer.” Holmes v. Summer (2010) 188 Cal.App.4th 1510, 1518. The seller’s real estate agent or broker is under the same duty of disclosure when they are also aware of such facts. Ibid.

At bar, the First Amended Complaint (“FAC”) alleges Heger signed disclosure statements stating, “Seller remains obligated to make the disclosures,” and “Seller is obligated to disclose known material facts affecting the value and desirability of the Property.” FAC, ¶¶ 3-4, Ex. A. Thus, Plaintiffs sufficiently allege a duty for Heger to make certain disclosures, her failure to do so, and resulting injury. FAC, ¶¶ 3-5, 7-9.

The [economic loss] rule itself is deceptively easy to state: In general, there is no recovery in tort for negligently inflicted ‘purely economic losses,’ meaning financial harm unaccompanied by physical or property damage.” Rattagan v. Uber Technologies, Inc. (2024) 17 Cal.5th 1, 20 (quotations omitted). Stated another way, “[t]he economic loss rule requires a [contractual party] to recover in contract for purely economic loss due to disappointed expectations, unless [the party] can demonstrate harm above and beyond a broken contractual promise.” Ibid. (quotations omitted).

When evaluating whether the parties' expectations and risk allocations bar tort recovery, the court must consider the alleged facts. First, applying standard contract principles, it must ascertain the full scope of the parties' contractual agreement, including the rights created or reserved, the obligations assumed or declined, and the provided remedies for breach. Second, it must determine whether there is an independent tort duty to refrain from the alleged conduct. Third, if an independent duty exists, the court must consider 9

whether the plaintiff can establish all elements of the tort independently of the rights and duties assumed by the parties under the contract.

The guiding and distinguishing principle is this. If the alleged breach is based on a failure to perform as the contract provides, and the parties reasonably anticipated and allocated the risks associated with the breach, the cause of action will generally sound only in contract because a breach deprives an injured party of a benefit it bargained for. However, if the contract reveals the consequences were not reasonably contemplated when the contract was entered and the duty to avoid causing such a harm has an independent statutory or public policy basis, exclusive of the contract, tort liability may lie.

Id. at 26.

At bar, Plaintiffs’ cause of action for negligence alleges non-economic damages “including resulting damages to personal and real property” and “loss of use and enjoyment” of the property. FAC, ¶ 10. Therefore, plaintiff has sufficiently alleged Defendant’s negligence resulted in injury outside the risks reasonably contemplated by the parties upon entering the contract. As such, the demurrer as to the second cause of action is overruled.

Second Cause of Action – Breach of Written Contract

Heger argues Plaintiffs’ FAC fails to allege breach of contract allegations, but rather alleges tortious or negligent conduct of third parties. The Court disagrees.

To state a claim for breach of contract, a plaintiff must allege: (1) the existence of the contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendant's breach, and (4) the resulting damages to the plaintiff. D'Arrigo Bros. of California v. United Farmworkers of America (2014) 224 Cal.App.4th 790, 800. Defendant argues the complaint does not state whether the alleged agreement was written, oral, or implied, and does not clearly allege the specific terms of the contract that were breached. The court disagrees.

At bar, the FAC alleges the existence of the Real Estate Purchase Agreement, Plaintiffs’ performance, Heger’s breach by her failure to inspect or inform Plaintiffs of the defects and deficiencies in the house, and Plaintiffs’ resulting damages. FAC, ¶¶ 2-3, 5. Such is sufficient to withstand the challenge on demurrer.

Third Cause of Action – Nuisance

Heger argues defects which only affect an owner’s interest in the property do not constitute a nuisance, and no facts show Heger personally created any condition that substantially or unreasonably interfered with Plaintiffs’ use or enjoyment of the property. The Court again disagrees.

“[T]he essence of a private nuisance is its interference with the use and enjoyment of land.” Oliver v. AT&T Wireless Services (1999) 76 Cal.App.4th 521, 534. “So long as the interference is substantial and unreasonable, and such as would be offensive or inconvenient to the normal 10

person, virtually any disturbance of the enjoyment of the property may amount to a nuisance; . . . .” Mendez v. Rancho Valencia Resort Partners, LLC (2016) 3 Cal.App.5th 248, 262.

At bar, the FAC alleges Plaintiffs occupied the property, at which Heger’s failure to act created a condition or permitted a condition to exist which was harmful to Plaintiffs’ health such as to interfere with their comfortable enjoyment of life or property, and that the condition substantially interfered with Plaintiffs’ use or enjoyment of their land. FAC, ¶¶ 10, 18. The Complaint sufficiently asserts Heger’s failure to act created the condition which substantially interfered with Plaintiffs’ use or enjoyment of their land. Therefore, the demurrer as to this cause of action is overruled.

Fourth and Fifth Causes of Action – Fraud by Intentional Misrepresentation and Concealment

Heger argues Plaintiffs fail to meet the specificity requirement to sustain allegations of fraud, Heger’s intent, or justifiable reliance on the part of Plaintiffs. The Court is not persuaded.

“The elements of fraud that will give rise to a tort action for deceit 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.’ ” Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 974

Here, Plaintiffs allege Heger informed Plaintiffs the subject property was in good repair and it was habitable, that those representations were false because the property contained significant defects, that Defendants knew such to be false, and that Heger intended Plaintiffs would rely on the false representation so they would purchase the property, and resulting damages. FAC, ¶¶ 23-27, 29. The FAC states “Defendants designed, constructed, applied, manufactured, inspected, failed to inspect, repaired, failed to repair, or otherwise acted or omitted to act regarding the condition of the house” such that the “many defects and deficiencies including, but not limited to: a poorly designed drainage system, an inadequate electrical system, a failed foundation system, defective siding on the garage, and a failed well water system.”

FAC, ¶ 2. Such is sufficient to allege knowledge of falsity and/or concealment on the part of Defendant for the purposes of demurrer.

Sixth Cause of Action – Negligent Misrepresentation

Finally, Defendant again argues plaintiff fails to allege the specific false statement or misrepresentation, or facts showing the Trustee lacked reasonable grounds for believing any representation was true. Heger also argues Plaintiffs improperly conflate negligent misrepresentation with intentional conduct, and that any alleged latent defects are subject to disclosure obligations. The court again disagrees.

“Negligent misrepresentation requires an assertion of fact, falsity of that assertion, and the tortfeasor’s lack of reasonable grounds for believing the assertion to be true. It also requires the tortfeasor’s intent to induce reliance, justifiable reliance by the person to whom the false assertion of fact was made, and damages to that person. An implied assertion of fact is ‘not 11

enough’ to support liability.” SI 59 LLC v. Variel Warner Ventures, LLC (2018) 29Cal.App.5th 146, 154 (internal citation omitted).

At bar and as discussed above, the FAC identifies facts sufficient to allege Heger had a duty to Plaintiffs, acts or omissions that constituted misrepresentation, as well as the many defects and deficiencies which Defendant would have had no reasonable grounds for believing the representations to be true given her ownership of the house and experience in the field, and that Plaintiffs justifiably relied on the statements and were damaged as a result. FAC, ¶¶ 2, 43-48. Therefore, the demurrer as to the sixth cause of action is overruled.

Uncertainty

A party may object by special demurrer on the grounds that the subject pleading is uncertain. Code Civ. Proc. § 430.10(f). “ ‘[U]ncertain’ includes ambiguous and unintelligible.” Smith v. Kern County Land Co. (1958) 51 Cal.2d 205, 209. “A special demurrer on the ground that [a pleading] is (a) ambiguous, (b) unintelligible, or (c) uncertain is insufficient unless the demurrer points out specifically wherein the pleading is ambiguous, uncertain or unintelligible.” Coons v. Thompson (1946) 75 Cal.App.2d 687, 690.

The recitation of essential facts set forth in the FAC and in Heger’s demurrer demonstrates that the complaint is not unintelligible or ambiguous and that Defendant understands the issues and the nature of each cause of action alleged by Plaintiff. See Youngman v. Nevada Irrigation Dist. (1969) 70 Cal.2d 240, 245 (“a Plaintiff is required only to set forth the essential facts of his case with reasonable precision and with particularity sufficient to acquaint a Defendant with the nature, source and extent of his cause of action”); Dumm v.

Pacific Valves (1956) 146 Cal.App.2d 792, 799. For this reason, the complaint is not so incomprehensible that defendant cannot reasonably respond. Morris v. JPMorgan Chase Bank, N.A. (2022) 78 Cal.App.5th 279, 292. In addition, to the extent the complaint or any particular cause of action alleged in the complaint is in some respects uncertain, any “ambiguities can be clarified under modern discovery procedures.” Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 616.

For all reasons discussed above, Defendant has failed to meet her burden to demonstrate that the complaint is uncertain. Therefore, the Court will overrule the demurrer on the grounds of uncertainty.

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