Nicholson v. Bland

Before the Court is a Demurrer by Defendant Daniel Bland to the First Amended Complaint (FAC) filed by Plaintiff Paul Nick Nicholson. For the reasons set forth herein, the Demurrer is SUSTAINED in part and OVERRULED in part.

1st Cause of Action – Breach of Contract

The role of a demurrer is “to test the legal sufficiency of a complaint.” (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994, citations omitted.) A demurrer challenges the defects appearing on the face of the pleading or from other matters properly subject to judicial notice. (See Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) A demurrer challenges only the legal sufficiency of the affected pleading, not the truth of the factual allegations in the pleading or the pleader’s ability to prove those allegations. (Cundiff v. GTE Cal., Inc. (2002) 101 Cal.App.4th 1395, 1404-1405.) Questions of fact cannot be decided on demurrer. (Berryman v. Merit Prop. Mgmt., Inc. (2007) 152 Cal.App.4th 1544, 1556.)

The Court previously overruled the demurrer to this cause of action. The cause of action is identical to what was stated in the original complaint.

Notwithstanding, Bland’s new arguments do not change the result. In the FAC, plaintiff now alleges at para. 23 that “each and every defendant lacked lawful authority to settle without court approval.” Defendant argues that since he lacked “contractual capacity,” then he can’t be sued for breach of contract. (Demurrer at 4:1-3) However, plaintiff does not allege lack of capacity. Further, plaintiff alleges the Bankruptcy Court entered its final decree on 4/23/24 (Para. 21) and that the defendants thereafter continued to represent performance was forthcoming (Para. 74(b) and (c).). “Ratification is the voluntary election by a person to adopt in some manner as his own an act which was purportedly done on his behalf by another person, the effect of which, as to some or all persons, is to treat the act as if originally authorized by him. [Citations.]” (Rakestraw v. Rodrigues (1972) 8 Cal.3d 67, 73

The Court finds the issue of whether a contract exists to be a question of fact and sufficiently pled to get past demurrer. Therefore, the demurrer to the 1st cause of action is again OVERRULED.

2nd Cause of Action – Breach of Covenant of Good Faith and Fair Dealing

The elements of this cause of action are: (i) A contract; (ii) The defendant’s actions pursuant to the contract that destroys or injures the rights of the plaintiff to receive the benefits of the contract; and (iii) Resulting damages. (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 36) “If the allegations do not go beyond the statement of a mere contract breach and, relying on the same alleged acts, simply seek the same damages or other relief already claimed in a companion contract cause of action, they may be disregarded as superfluous as no additional claim is actually stated.” (Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1395)

Here, the 1st and 2nd causes of action are essentially the same, are based on the same facts, and seek the same damages. The only apparent difference is the second cause of action asserts that not only did Bland breach the contract by not paying, he also made excuses for not paying which plaintiff claims were made in bad faith. There is no allegation Bland failed or refused to discharge the contractual duties that affected plaintiff’s rights other than that he failed to pay and gave various excuses for not paying.

Accordingly, the demurrer to the 2nd cause of action is SUSTAINED. 3rd and 4th Causes of Action – Fraud by Intentional Misrepresentation and Promissory Fraud

The elements of a fraud cause of action 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. [Citation.]” (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 173, internal quotation marks omitted.)

Promissory fraud is a subspecies of 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. Sup.Ct. (1996) 12 Cal.4th 631, 638; CACI 1902.)

Here, plaintiff alleges promises made, and material facts omitted regarding the corporate Defendants’ receivership status, on certain dates. While Bland characterizes these allegations as unconnected and “scurrilous,” for purposes of demurrer, the plaintiff has sufficiently stated a cause of action. The truth of such allegations, and the merit thereof, are matters for the trier of fact.

Accordingly, the demurrer to the 3rd and 4th causes of action are OVERRULED.

5th and 6th Causes of Action – IIED and NIED

CACI No. 1600 sets for the elements necessary to establish a cause of action for Intentional Infliction of Emotional Distress. CACI 1620 sets forth the essential factual elements for “Negligence—Recovery of Damages for Emotional Distress—No Physical Injury—Direct Victim.”

Here, Plaintiff alleges Bland entered into an agreement to pay a certain sum of money. This agreement to pay was negotiated by attorneys for Bland and plaintiff. The purpose of the negotiated settlement agreement was to resolve a dispute over monies owed under a contract wherein plaintiff and his company performed commercial services for the defendants.

The facts pled do not show that the failure to pay on the contract was something a “reasonable person would be unable to cope with.” Further, contrary to plaintiff’s assertions, there was nothing in the relationship between plaintiff and Bland which put Bland in a position of authority over the plaintiff or would otherwise establish “outrageous” conduct. Because plaintiff has failed to plead sufficient facts to state the 5th and 6th causes of action, the demurrer is SUSTAINED.

7th Cause of Action - Violation of Cal. Penal Code §§ 484 (Grand Theft), 496 (Receiving Stolen Property), and 503 (Embezzlement); Each of these Penal Code Sections are based on the defendant taking something away from another person. Here, there is no allegation that Bland took something from the plaintiff. Instead, the allegation is that Bland failed to pay amounts owed under a negotiated settlement agreement.

Accordingly, the demurrer to the 7th cause of action is SUSTAINED.

8th Cause of Action - Conversion

The elements of a conversion claim are: (1) plaintiff owned, possessed, or had a right to possess personal property; (2) defendant intentionally took possession of the property for a significant period of time, prevented plaintiff from having access to the property for a significant period of time, or destroyed the property; (3) plaintiff did not consent; (4) causation; (5) damages. (CACI 2100; Lee v. Hanley (2015) 61 Cal.4th 1225, 1240.) “[A] mere contractual right of payment, without more, will not suffice” to support a claim for conversion. (Citation).” (Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 232–33.)

All that plaintiff alleges in this case is a failure to perform under a negotiated contract. There is no allegation that money was taken from the plaintiff.

Accordingly, the demurrer to the 8th cause of action is SUSTAINED.

9th Cause of Action - Financial Elder Abuse

The elements of a cause of action for elder abuse based upon financial abuse are: (i) Defendant took / hid / appropriated /obtained / or retained Plaintiff’s property; (ii) Plaintiff was 65 years of age at the time of the conduct; (iii) Defendant took / hid / appropriated /obtained / or retained the property for a wrongful use or with the intent to defraud or by undue influence; (iv) Plaintiff was harmed; and (v) Defendant’s conduct was a substantial factor in causing Plaintiff's harm. (Welf. & Inst. Code § 15610.30; CACI 3100.)

Generally, a straight breach of contract does not give rise to a claim for elder abuse.” (Paslay v. State Farm Gen. Ins. Co. (2016) 248 Cal.App.4th 639, 658, fn. 15 - “the legislative history [of Welfare & Inst. Code §15610.30] does not demonstrate an intent to deem mere breaches of contract actionable instances of elder abuse.” “Where an elder person is being deprived of property under a contract, a mere breach of the contract is insufficient to establish wrongful use. Paslay v. State Farm Gen. Ins. Co., 248 Cal. App. 4th 639, 658(Ct. App. 2016). Instead, ‘wrongful conduct occurs only when the party who violates the contract actually knows that it is engaging in a harmful breach, or reasonably should be aware of the harmful breach.’ Id.” (Pitt v. Metro. Tower Life Ins. Co. (S.D. Cal. 2023) 675 F. Supp. 3d 1073, 1085) Here, there are no allegations that Bland “takes, secretes, appropriates, obtains, or retains real or personal property of an elder or dependent adult for a wrongful use or with intent to defraud, or both” as required by Welf. & Inst. Code §15610.30(a)(2). Instead, plaintiff alleges Bland is liable for “refusing to tender the agreed $325,000, which Nicholson was entitled to receive under the settlement agreement.”

Accordingly, the demurer to the 9th cause of action is SUSTAINED.

10th Cause of Action - “Alter Ego and Piercing the Corporate Veil.”

Alter-ego liability cannot be asserted as an independent claim for substantive relief. (See e.g., Leek v. Cooper (2011) 194 Cal.App.4th 399, 418 - “A claim based upon an alter ego theory is not itself a claim for substantive relief”; Hennessey’s Tavern, Inc. v. American Air Filter Co. (1988) 204 Cal.App.3d 1351, 1359.) It is merely a procedural theory that allows the plaintiff to prove that someone other than the named corporate defendant is liable for the acts of the corporate defendant. (Shaoxing County Huayue Import & Export v. Bhaumik (2011) 191 Cal.App.4th 1189, 1198; Peacock v. Thomas (1996) 516 U.S. 349, 354 (“Piercing the corporate veil is not itself an independent ... cause of action, ‘but rather is a means of imposing liability on an underlying cause of action.’”)

Plaintiff does not dispute that alter ego allegations cannot be a standalone cause of action but argues the additional facts should be construed as supporting the other causes of action. (Opp. at 22:21-22)

However, because a separate cause of action has not been stated, the demurer to the 10th cause of action is SUSTAINED.

11th Cause of Action - Declaratory Relief

At page 4, line 16 of the Demurrer, Bland asserts the cause of action for Declaratory Relief fails to state sufficient facts. As plaintiff correctly points out, there is actually no argument or authority as to this cause of action anywhere else in the demurrer. Accordingly, the demurrer to the 11th cause of action is OVERRULED.

In plaintiff’s opposition, he has neither requested leave to amend nor offered any facts supporting a request for leave. Therefore, where the demurrer has been sustained above, it is SUSTAINED WITHOUT LEAVE TO AMEND.

Defendant Bland to file his answer within 14 days.

Defendant is ordered to give notice.