RICE, et al v NELSON, et al

RICE, et al v NELSON, et al

DEFENDANT’S MOTION TO STRIKE PUNITIVE DAMAGES ALLEGATIONS AND PRAYER FOR ATTORNEY’S FEES FROM PLAINTIFF’s FIRST AMENDED COMPLAINT

On June 18, 2024, Victoria Rice and John Rice, Jr. (“Plaintiffs”) filed their Complaint against Defendants Sharon Nelson, Mark Nelson (collectively, “Sellers”) and real estate agent Wendy McCormick (“Agent”) arising out of a real estate transaction between Plaintiffs and the Sellers. On November 6, 2024, the Court sustained in part, and overruled in part, the demurrer filed by Agent. At that time, the court also granted in part, and denied in part, the motion to strike. Plaintiffs filed a First Amended Complaint (“FAC”) on December 18, 2024. Now before the Court is Sellers’ motion to strike portions of the FAC

A motion to strike is subject to the deadlines set forth in Code Civ. Proc. § 435(b)(1) and therefore must be filed “within the time allowed to respond to a pleading.” (Ibid; see also California Rules of Court 3.1322.) Here, the FAC was filed on December 18, 2024, and Sellers each filed an Answer on January 30, 2025. Nonetheless, the motion to strike was not filed until nineteen months later. However, despite the untimeliness of the motion, the Court has authority to act on its own initiative to strike improper matters and “at any time in its discretion, and upon terms it deems proper.” (Code Civ. Proc. § 436.) The Court may consider an untimely motion to strike "so long as its action does ‘not affect the substantial rights of the parties.” (Jackson v. Doe (2011) 192 Cal.App.4th 742, 750.)

There is no evidence of prejudice to the Plaintiffs and accordingly, the Court will therefore consider the merits of the motion.

I. FACTS AND PROCEDURAL HISTORY

In or around 2019 through 2020, Plaintiffs, with the help of Agent, sought to purchase a new home and were informed of an “amazing place” located at 974 Laurel Lane, Murphys, Calaveras County, California, 95247 (“Property.”)(FAC ¶ 7.) Because of the restrictions in place during the Covid-19 epidemic, Agent provided Plaintiffs with a walkthrough of the Property via video call. (Id. ¶ 8.) Plaintiffs, despite Agent’s insistence that it was unnecessary, chose to have an inspection of the Property. (Ibid.)

Prior to execution of the sales agreement, Plaintiffs received a Real Estate Transfer Disclosure Statement (“Disclosure”) which they allege fraudulently concealed significant defects, malfunctions, and environmental hazards affecting the Property. (FAC ¶ 10.) Plaintiffs allege that Sellers also concealed material information about the defects, malfunctions, and hazards in a document entitled Seller Property Questionnaire (“SPQ”) (Ibid.)

On February 15, 2021, Plaintiffs attended the inspection of the Property where they were surprised to learn that the inspector (“Adelhelm”) was Agent’s spouse. Adelhelm’s inspection report indicated that the Property was generally in good condition, with an old but still usable roof, and some minor erosion issues. (Id. ¶ 14.) On February 16, 2021, the Plaintiffs contacted Adelhelm via telephone to address specific concerns regarding the Property. During this call, Agent, who was present with Adelhelm, was fully aware of the Plaintiffs' inquiries and made statements aimed at alleviating Plaintiffs’ concerns (i.e., with regards to their concerns about foundation erosion and holes, Agent stated it was attributable to rodents and an underground spring.) (Id. ¶ 16.)

On March 3, 2021, Plaintiffs met with Sellers and Agent to address concerns with the Property. (FAC ¶ 17.) Sellers advised Plaintiff of many upgrades and fixes but failed to disclose materially important information about deck issues, repair of the retaining wall, and issues with the stucco on the back of the house. (Ibid.) Based on the representations of Sellers and Agent, Plaintiffs entered into a purchase agreement and took ownership of the Property on March 10, 2021. (Id. ¶ ¶ 18, 19.)

In 2022, following significant rainstorms in the area, Plaintiffs became aware of numerous issues with the Property. (FAC ¶ 20.) Plaintiffs contacted Adelhelm who suggested they reach out to their home warranty company. (Id. ¶ 21.) Plaintiffs then learned from a contractor that the Property had serious structural concerns that would need to be repaired. (Id. ¶ 22.)

In February 2024, the Plaintiffs encountered Eugene Carr (“Carr”), a contractor who had rented the Property prior to its purchase by the Plaintiffs. (FAC ¶ 23.) Carr denied ever having made any repair work on the Property. (Ibid.) Later Plaintiffs learned that Sellers had been made aware (by Carr) of many structural issues with the deck but failed to make any repairs. (Id. ¶¶ 23-26.) In March 2024, Plaintiffs found black mold which was

determined to have been caused by various defects, including the poorly constructed deck and retaining wall. (Id. ¶ 27.)

After inspections, Plaintiffs received a preliminary estimate for repair in the amount of $198,322.00 based on the extensive nature, the site conditions, the limited accessibility, and reconstruction costs. (FAC ¶ 30.)

As against the Sellers, Plaintiffs’ FAC alleges causes of action for:1) breach of contract, 2) violation of California Civil Code § 1102, 3) fraud by concealment, and 4) fraudulent misrepresentations. Among other relief, Plaintiffs seek attorney’s fees and punitive damages.

II. LEGAL STANDARD FOR MOTION TO STRIKE

A motion to strike lies either to strike: (1) any “irrelevant, false or improper matter inserted in any pleading”; or (2) any pleading or part thereof “not drawn or filed in conformity with the laws of this state, a court rule or order of court.” (CCP § 436.) A motion to strike may also be used to strike allegations related to an improper request for relief. (Saberi v. Bakhtiari (1985) 169 Cal.App.3d 509, 517.) A motion to strike can be used to attack the entire pleading, or any part thereof—i.e., even single words or phrases. (Warren v. Atchison, Topeka & Santa Fe Ry. Co. (1971) 19 Cal.App.3d 24, 40.)

III.

Analysis

A. Attorney’s Fees

Attorney’s fees are recoverable by a party only if specifically provided for by a statute or law, or if authorized by an express agreement between the parties. (Nasser v. Superior Court (1984) 156 Cal.App.3d 52, 56 [“Absent an agreement or statute, a party is generally precluded from recovery of attorney fees”].)

Plaintiffs do not identify any statute or contractual provision which would allow for attorney’s fees. Accordingly, the motion to strike is granted, with leave to amend.

B. Punitive Damages

Punitive damages are recoverable where a plaintiff proves “by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice.” (Civ. Code, § 3294.) Relevant to this case, “malice” means conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of rights or safety of others. (Ibid.)

Punitive damages are not allowable in breach of contract claims. (Purcell v. Schweitzer (2014) 224 Cal.App.4th 969, 976.) Accordingly, the request for punitive damages arising solely out of the breach of contract claim is improper and the motion to strike references to punitive damages in Paragraph 42 of the FAC is granted.

Sellers also move to strike the claims for punitive damages set forth in the cause of action for violation of Cal. Civil Code section 1102. Sellers argue that the allegations in this cause of action lack the specificity required for fraud claims.

The Court disagrees. “In passing on the correctness of a ruling on a motion to strike, judges read allegations of a pleading subject to a motion to strike as a whole, all parts in their context, and assume their truth.” (Clauson v. Superior Court (1998) 67 Cal.App.4th 1253, 1255.) That is, the Court does not “read allegations in isolation.” (Ibid.) Here, throughout the FAC, Plaintiffs set out factual allegations alleging that Sellers knowingly and willfully acted in a manner that they knew would cause harm to Plaintiffs and that Plaintiffs were in fact harmed. (FAC ¶¶ 39-42;45-48; 61-63; 67-72.)

Plaintiffs allege that Sellers intentionally misrepresented the condition of the Property both in meetings and on the various disclosure forms. (Ibid.) They further allege that Sellers purposefully and intentionally hid conditions – such as masking cracks or obscuring defects with objects – so that Plaintiffs would not know of the actual condition of the Property. (See e.g., FAC ¶ 17, 45, 46, 60.) Plaintiffs allege that all of these acts of concealment and misrepresentation were done for the economic benefit of Sellers.

At this stage of the proceedings, this is sufficient to allege conduct which could give rise to punitive damages.

Accordingly, the motion to strike references to punitive damages (outside the breach of contract cause of action) is denied.

IV.

Conclusion

The motion to strike reference to attorney’s fees is GRANTED, with 20 (twenty) days leave to amend. The motion to strike reference to punitive damages is GRANTED as to Paragraph 42 of the FAC, with 20 (twenty) days leave to amend. The motion to strike remaining references to punitive damages is DENIED.

The clerk shall provide notice of this ruling to the parties forthwith. Defendant Sellers to submit a formal Order complying with Rule 3.1312 in conformity with this Ruling.