ROSA FLORES vs MICHAEL LEAL, et al.

2023CUPP017719: ROSA FLORES vs MICHAEL LEAL, et al.

It is well settled that fraud claims must be pled with specificity. (See Cansino v. Bank of America (2014) 224 Cal.App.4th 1462, 1472.) A plaintiff must plead facts which “show how, when, where, to whom, and by what means the representations were tendered.” (Hills Transportation Co. v. Southwest (1968) 266 Cal. App. 2d 702, 707.) “[T]he policy of liberal construction of the pleadings will not ordinarily be invoked to sustain a pleading defective in any material respect.” [Citation.] (Lazar, supra, 12 Cal.4th 631, 645.) “We enforce the specificity requirement in consideration of its two purposes.

The first purpose is to give notice to the defendant with sufficiently definite charges that the defendant can meet them. [Citation.] The second is to permit a court to weed out meritless fraud claims on the basis of the pleadings; thus, ‘the pleading should be sufficient ‘‘to enable the court to determine whether, on the facts pleaded, there is any foundation, prima facie at least, for the charge of fraud.’’ [Citation.]” (West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 793.)

This strict requirement serves two primary functions: first, it provides the defendant with notice of the definite charges to be intelligently met; and second, it enables the court to determine whether there is a prima facie foundation for the charge, allowing the court to weed out nonmeritorious actions on the face of the pleadings. (Committee on Children's Television, Inc. v. General Foods Corp. (1983) 35 Cal. 3d 197, 216; Wald v. TruSpeed Motorcars, LLC (2010) 184 Cal. App. 4th 378, 393-394.)

B. Analysis

1. Facts pled against Defendants Tri County and Cortez specifically

Reading the Complaint with its six causes of action in its entirety, the facts alleged concerning wrongdoing specifically by Defendants Tri County and Cortez include the following:

(1) “The Pest Co. breached this duty by failing to properly inspect and then eradicate termites from the Property.” (2nd C/A, p. 5.)

(2) “Defendants Century 21 Everest, Ana Gil, Tri-County Pest Control and Ruben Cortez conspired to represent to both Plaintiff and her lender, Community West Bank, that the required termite repairs in Areas 10A, 1A, 11A and 11B ‘were completed by others.’” (6th C/A, FR-2a p. 9.)

(3) “None of the termite repairs in Areas 10A, 1A, 11A and 11B were ever undertaken, much less completed.” (6th C/A, FR-2b p. 9.)

(4) “Said Defendants intentionally concealed the fact that none of the required termite repairs had ever been undertaken, much less completed.” (6th C/A, FR-3a, p. 9.)

(5) Plaintiff Purchased the subject property located at 1500 Richmond Rd., Space #91, Santa Paula, CA on or about March 3, 2023, believing that all of the termites had been eradicated and all of the termite damage had been repaired.” (6th C/A, FR-5 p. 10.)

2023CUPP017719: ROSA FLORES vs MICHAEL LEAL, et al.

(6) The subject property is infested with dry wood termites, subterranean termites, fungus.” (6th C/A, FR-6 p. 10.)

2. Application

Here, Defendants are correct that the facts pled against Tri County and Cortez here are lacking in specificity as to several important elements required for a proper fraud action, as is discussed below.

a. Misrepresentation

“[A] cause of action for misrepresentation requires an affirmative statement, not an implied assertion.” (RSB Vineyards, LLC v. Orsi (2017) 15 Cal.App.5th 1089, 1102 [223 Cal.Rptr.3d 458].)

Here, no specific statement by these Defendants to Plaintiff is alleged. The only fact alleged is that these Defendants conspired to represent to Plaintiff and her lender that the termite repairs were completed by others. The FAC indicates that “Defendants Century 21 Everest, Ana Gil, Tri-County Pest Control and Ruben Cortez conspired to represent to both Plaintiff and her lender, Community West Bank, that the termite repairs in Areas 10A, 1A, 11A, and 11B ‘were completed by others.’” (6th C/A, FR-2a p. 9.) There is no allegation that these Defendants at any point made any specific statements or representations to Plaintiff whatsoever, who made a statement, what was said, when it was said, or how it was said. The statement that parties conspired to represent something is insufficient to establish an affirmative statement by any particular Defendant.

b. Knowledge of Falsity (Scienter)

To sufficiently plead knowledge of falsity, a plaintiff must allege specific facts showing that the defendant made a false representation while knowing it was untrue or made it without reasonable grounds for believing it to be true. This is established by pleading:

• The suggestion, as a fact, of that which is not true, by one who does not believe it to be true, or

• The positive assertion of that which is not true, made in a manner not warranted by the information of the person making it, or without reasonable grounds for believing it to be true.

(Cal Civ Code § 1572, Cal Civ Code § 1710.)

Here, Plaintiff alleges that these Defendants “intentionally concealed the fact that none of the required termite repairs in Areas 10A, 1A, 11A, and 11B had ever been undertaken, much less completed.” That is the extent of the allegations as to any falsity. These allegations consist of

2023CUPP017719: ROSA FLORES vs MICHAEL LEAL, et al.

mere conclusions about what these Defendants may or may not have known at the time of the alleged concealment or misrepresentation. This is insufficient to plead knowledge of falsity.

c. Intent to Defraud

To sufficiently plead an intent to defraud (an intent to induce reliance or deceive), the plaintiff must allege facts establishing that the defendant made the representation with the specific purpose of inducing the plaintiff to alter their position to their injury or to induce them to enter into a contract. (Cal Civ Code § 1572, Cal Civ Code § 1709.)

Given that Plaintiff fails to allege any facts to suggest Defendants Tri County and Cortez made a knowingly false statement to Plaintiff, there is no basis for inferring any intent to defraud here.

d. Justifiable reliance

“Reliance exists when the misrepresentation or nondisclosure was an immediate cause of the plaintiff's conduct which altered his or her legal relations, and when without such misrepresentation or nondisclosure he or she would not, in all reasonable probability, have entered into the contract or other transaction.” (Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1239.) “Except in the rare case where the undisputed facts leave no room for a reasonable difference of opinion, the question of whether a plaintiff's reliance is reasonable is a question of fact.” (Ibid. [quoting Blankenheim v.

E. F. Hutton & Co. (1990) 217 Cal.App.3d 1463, 1475]; see also Wilke v. Coinway, Inc. (1967) 257 Cal.App.2d 126, 138 [“What would constitute fraud in a given instance might not be fraudulent when exercised toward another person. The test of the representation is its actual effect on the particular mind, whether it is a strong and circumspect mind, or one weak and too relying [citation].” (citation omitted)].)

Plaintiff may have relied on express or implied representations that Tri County and Cortez had properly performed a termite inspection. However, Plaintiff pleads no facts that suggest she relied on any promise or statement actually made to her by Tri County or Cortez, and that absent this particular promise or statement she would not have gone forward with the purchase transaction. The facts plead fail to support justifiable reliance.

e. Damages

“[U]nless the plaintiff merely seeks to rescind the contract, it must suffer actual monetary loss to recover on a fraud claim.” (Alliance Mortgage Co., supra, 10 Cal.4th at p. 1240.)

“In California a defrauded party is ordinarily limited to recovering his ‘out-of-pocket’ loss—the difference between the value with which he parted and the value he received.” (Housley v. City of Poway (1993) 20 Cal.App.4th 801, 812; see also Alliance Mortgage Co., supra, 10 Cal.4th at p. 1240 [“In fraud cases involving the ‘purchase, sale or exchange of property,’ the Legislature has expressly provided that the ‘out-of-pocket’ rather than the ‘benefit-of-the-bargain’ measure of damages should apply.”].) As such, damages are limited to out-of-pocket loss and any other damages within the scope of Civil Code § 3343. (Housley, supra, 20 Cal.App.4th at p. 814.)

2023CUPP017719: ROSA FLORES vs MICHAEL LEAL, et al.

Civil Code § 3343 was enacted in 1935 and, as the Supreme Court noted in 1978, “the cornerstone of the California standard for assessment of damages for fraud in property transactions has been the so-called ‘out-of-pocket’ rule.” (Stout v. Turney (1978) 22 Cal.3d 718, 725.)

If the alleged misrepresentations did in fact occur, Plaintiff adequately pleads facts that show she suffered economic harm (“economic and general damages because the Property is a total loss and cannot be repaired.”) However, in light of the Court’s findings as to the above elements, whether or not this final element is met is moot as it relates to these Defendants.

Conclusion: The demurrer of Defendants Tri County and Cortez is SUSTAINED, with leave to amend. Plaintiff has not pled sufficient facts to sustain a cause of action for fraud.

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