JOSHUA COTTONARO, ET AL VS. KRISTIN SPINDT

To properly state a cause of action, a complaint must allege every element of that cause of action. (Shaeffer v. Califia Farms, LLC (2020) 44 Cal.App.5th 1125, 1134.) To be sustained, a “demurrer must dispose of an entire cause of action.” (Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 119.)

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In determining whether a complaint states facts sufficient to constitute a cause of action, courts accept the factual allegations of the complaint and any matters of which judicial notice may properly be taken, but disregard contentions, deductions, and conclusions. (Code Civ. Proc., § 430.30, subd. (a); Richtek USA, Inc. v. uPI Semiconductor Corp. (2015) 242 Cal.App.4th 651, 658.) “The complaint must be given a reasonable interpretation and read as a whole with its parts considered in their context.” (Herman v. Los Angeles County Metropolitan Transportation Authority (1999) 71 Cal.App.4th 819, 824.) Thus, the complaint is construed liberally (Code Civ. Proc., § 452), and facts that may be inferred from those expressly alleged must also be accepted as true. (Cundiff v. GTE Cal., Inc. (2002) 101 Cal.App.4th 1395, 1405.)

FIRST CAUSE OF ACTION: FRAUD

The first cause of action is for fraud, the elements of which 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 [quotation marks omitted].) These elements must be pleaded with particularity, and “the policy of liberal construction of the pleadings will not ordinarily be invoked to sustain a pleading defective in any material respect. This particularity requirement necessitates pleading facts which show how, when, where, to whom, and by what means the representations were tendered.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645 [quotation marks, ellipses, and bracketed text omitted].)

The SAC contains multiple allegations of purported misrepresentations by Spindt, including affirmative misrepresentations and failures to disclose. However, the only injury alleged to have been caused by the Cottonaros’ reliance is that they “were forced to incur attorney’s fees to defend against an Unlawful Detainer brought by a third person.” (SAC, ¶ 24.) Spindt contends this is not a compensable injury, citing the American rule against fee shifting. Although the reasoning behind this contention is flawed—attorney fees may be recoverable as damages in recognized circumstances (see, e.g., Prentice v.

North Amer. Title Guaranty Corp., Alameda Div. (1963) 59 Cal.2d 618, 620 [tort-of-another doctrine])—the ultimate conclusion that the alleged fees do not support the fraud cause of action is correct. The SAC does not adequately allege that the attorney fees were proximately caused by the Cottonaros’ reliance.

“[T]here are two causation elements in a fraud cause of action. First, the plaintiff’s actual and justifiable reliance on the defendant’s misrepresentation must have caused him to take a detrimental course of action. Second, the detrimental action taken by the plaintiff must have caused his alleged damage.” (Beckwith v. Dahl (2012) 205 Cal.App.4th 1039, 1062.) The SAC alleges that the Cottonaros relied on Spindt’s representations by “sign[ing] the residential lease agreement and addendum.” (SAC, ¶ 22.)

Although execution of the lease and option may have been a but-for cause of the later unlawful detainer action, the proximate cause of the attorney fees was the Cottonaros’ decision to retain possession of the leased property notwithstanding the absence of an executed option contract, followed by the third party’s decision to pursue a judicial remedy. Even if the Cottonaros retained counsel to defend the unlawful detainer action under the mistaken belief that the option was enforceable—which is not alleged—the SAC does not allege facts showing that continued reliance on Spindt’s prior representations was justified once the validity of the option was disputed.

Accordingly, the demurrer to the first cause of action is SUSTAINED. Because the Cottonaros have already had an opportunity to cure defects in this cause of action and have not requested leave to amend, leave to amend is DENIED. (See Thornton v. California Unemployment Ins. Appeals Bd. (2012) 204 Cal.App.4th 1403, 1423.)

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SECOND AND THIRD CAUSES OF ACTION: BREACH OF CONTRACT AND BREACH OF THE IMPLIED COVENANT

The second and third causes of action are for breach of contract and breach of the implied covenant of good faith and fair dealing. A valid contract is an element of both causes of action. (Richman v. Hartley (2014) 224 Cal.App.4th 1182, 1186; see Robinson v. Magee (1858) 9 Cal. 81, 83.)

In opposition to the prior demurrer to these causes of action, the Cottonaros contended that Spindt may be held liable on the lease and option addendum even though the contracts identified her principals, the landlords, as the contracting parties. The Court acknowledged that agency principles may support such liability under some circumstances, but found that the prior complaint did not allege facts supporting those theories.

“Normally, the agent will not be liable on a written contract made in the name of the principal. (See Rest.3d, Agency § 6.01(2).)” (3 Witkin, Summary of Cal. Law (11th ed. 2025) Agency and Employment, § 207.) “If the agent has no authority to make the contract, the usual remedy of the third party is on the warranty of authority[,]” rather than on the contract. (Ibid.; see Civ. Code, §§ 2342, 3318; Kohlberg v. Havens (1919) 41 Cal.App. 222, 225.) “But if, in addition to the lack of authority there is bad faith, i.e., if the agent enters into the contract without believing that he or she has authority to do so, the California rule makes the agent liable on the contract as a principal.” (3 Witkin, Summary of Cal. Law, supra, Agency and Employment, § 207; see Civ. Code, § 2343, subd. (2); Borton v. Barnes (1920) 48 Cal.App. 589, 591–596.)

To cure the defect identified on the prior demurrer, the SAC now alleges that Spindt did not have authority to draft and present the option addendum to the Cottonaros and knew she had no such authority. (SAC, ¶ 33.) Those allegations are sufficient at the pleading stage to support liability against an agent on a contract, inferring from the SAC that presentation of the option addendum constituted an offer. (See, e.g., Nicholls Grain & Milling Co. v. Jersey Farm Dairy Co. (1933) 134 Cal.App. 126, 130–131.)

Spindt argues that the document, unsigned by Spindt or the landlords, demonstrates that no contract was formed. (See SAC, exh. B.) But this argument depends on the interpretation of the option addendum and its signature block. When a contract makes clear that it will become operative only if all parties sign, signatures are necessary for formation. (Banner Entertainment, Inc. v. Superior Court (1998) 62 Cal.App.4th 348, 358.) But a signed writing is not required in every case to bind a party. (See, e.g., O’Donnell v. Lutter (1945) 68 Cal.App.2d 376, 382–383.)

The presentation of the option addendum alongside the already executed lease may be construed, at the pleading stage, as an offer—especially in light of the allegation that Spindt knew the option was material to the Cottonaros. (See SAC, ¶ 8.) The SAC sufficiently alleges that a contract was formed when the Cottonaros accepted that offer by signing the addendum. Accordingly, the SAC sufficiently alleges a contract between the Cottonaros and the landlords, made through Spindt as the landlords’ agent, on which Spindt may be held directly liable based on her alleged bad faith.

Spindt also contends that the landlords are necessary parties whose absence prohibits the Cottonaros from proceeding on their contract causes of action. A necessary party is a person whose absence means either (1) complete relief cannot be afforded among the parties to the action, or (2) a judgment will leave a party to the action exposed to a risk of additional or inconsistent obligations. (Code Civ. Proc., § 389, subd. (a).) But a necessary party is not the same as an indispensable party. Only if an absent person is indispensable will the plaintiff be prohibited from proceeding. (See id., subd. (b).)

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Thus, before dismissing any cause of action for nonjoinder, courts must examine the statutory factors and determine indispensability. (See Pinto Lake MHP LLC v. County of Santa Cruz (2020) 56 Cal.App.5th 1006, 1019–1020.) “The determinations under [Code of Civil Procedure section 389] subdivision (b) ‘must be based on fact-specific considerations. [Citation.] These determinations are anything but pure legal conclusions ... . [T]hey involve the balancing of competing interests and must be steeped in “pragmatic considerations.”’” (County of San Joaquin v. State Water Resources Control Bd. (1997) 54 Cal.App.4th 1144, 1152 [brackets and ellipsis in original].) Spindt does not address those factors and does not argue that the landlords are indispensable parties. She therefore has not established that nonjoinder is grounds for demurrer.

Spindt’s final argument is that the Cottonaros cannot recover damages for their alleged moving expenses. But the SAC alleges other injuries resulting from the alleged breach of contract. (See SAC, ¶ 31 [alleging the option addendum limited rent increases and that the breach caused increased rent for a replacement tenancy].) A demurrer does not lie to only part of a cause of action, and Spindt did not move to strike the challenged allegations. The argument therefore does not support sustaining the demurrer.

Accordingly, the demurrer to the second and third causes of action is OVERRULED.

If the tentative ruling is uncontested, it shall become the order of the Court. Thereafter, counsel for Defendant Kristin Spindt shall prepare a written order consistent with the Court’s ruling for the Court’s signature pursuant to California Rules of Court, rule 3.1312, and shall provide written notice of the ruling to all parties who have appeared in the action, as required by law and the California Rules of Court.