A A A 

Tentative Ruling
Judge Pauline Maxwell
Department 6 SB-Anacapa
1100 Anacapa Street P.O. Box 21107 Santa Barbara, CA 93121-1107

CIVIL LAW & MOTION

Paulette Fransen vs Rene Koke et al

Case No: 17CV00710
Hearing Date: Wed Dec 13, 2017 9:30

Nature of Proceedings: (2) Demurrers; (1) Motion to Strike

TENTATIVE RULING:

(1)        For the reasons set forth herein, the demurrer of defendant Bank of America to the first amended complaint is sustained, with leave to amend.

(2)        For the reasons set forth herein, the demurrer of defendants Rene Koke and Marisa Koke is sustained, with leave to amend, as to the first and second causes of action of the first amended complaint, and is otherwise overruled.

(3)        For the reasons set forth herein, the motion of defendants Rene Koke and Marisa Koke is granted, with leave to amend, to strike from the text of the first amended complaint, paragraph 42 and the second and third sentences of paragraph 47 (“The Defendants’ acts and conduct … according to proof.”) and from the prayer, paragraphs 4 and 6.

(4)        Plaintiff shall file and serve her second amended complaint on or before December 28, 2017.

 

 

Background:

(1)        Allegations of First Amended Complaint

On March 1, 2013, plaintiff Paulette Fransen entered into a written agreement with Judi A. Marinelli, as trustee of the Marinelli Marital Trust dated January 23, 2009, and Michael T. Marinelli, as trustee of the Marinelli Irrevocable Trust dated October 3, 2012 (collectively, the Marinellis) by which Fransen leased real property located at 225 S. Milpas Street, Santa Barbara (the Property). (First Amended Complaint, filed Oct, 20, 2017, [FAC] ¶¶ 9, 10.) The term of the lease was for 10 years beginning on March 1, 2013, with an option to extend the term of the lease for two additional 60-month periods. (FAC, ¶ 9.)

The Property had been operating as a veterinary clinic under the prior tenant for over 20 years. (FAC, ¶ 10.) Over the ten years prior to the execution of the lease, the Property had consisted of two stories with a retail space downstairs and habitable living quarters built upstairs that was accessible only through stairs built in the interior of the first-floor retail space. (Ibid.) As a result, Fransen’s lease included the rental of the downstairs retail space and access to the upstairs portion of the Property. (Ibid.)

On October 16, 2015, the Marinellis received notification from the City of Santa Barbara (City) of certain violations relating to the Property, including that the upstairs unit was illegally converted to habitable space without City approval (the Violation). (FAC, ¶ 11.)

As a result, the Marinellis hired a general contractor who prepared and submitted plans to the City on December 22, 2015, to remediate the Violation. (Ibid.) The Marinellis did not request, demand, or suggest that Fransen was responsible for the Violation and at no time prior to the submission of the plans sought Fransen’s input in the plans. (Ibid.)

During this time, and unknown to Fransen, the Marinellis had been seeking a buyer to purchase the real estate including the Property. (FAC, ¶ 12.) Immediately prior to the submission of the plans, defendants Rene and Marisa Koke, as trustees of the Koke Family Trust, (collectively, the Kokes) were in the process of investigating the Property for purchase. (Ibid.) In December 2015, the Kokes received information that the Marinellis had been notified by City of the Violation and that the City wanted the Violation corrected immediately. (Ibid.) Nonetheless, the Kokes never spoke with Fransen about the citations, asked whether Fransen was responsible for the Violation, or asked Fransen to repair the issues prior to the close of escrow. (Ibid.)

The Kokes moved forward to purchase the real estate including the Property. (FAC, ¶ 13.) In order to acquire the funding to pay for the purchase, the Kokes solicited a loan from defendant Bank of America (Bank). (Ibid.) Bank required as a condition of the loan that the Kokes seek a subordination of Fransen’s lease to the deed of trust that would secure the new loan. (Ibid.) As a result, the Kokes and Bank, through its Vice President, Claudine Contreras, made a written representation in the proposed subordination agreement to Fransen on January 24, 2016: “ ‘the parties desire to subordinate [Plaintiff’s] leasehold interest in the Property to the lien of the Deed of Trust and to assure [Plaintiff] possession of the Property for the entire term of the Lease.’ ” (FAC, ¶ 14, emphasis omitted.) In reliance on this representation, Fransen entered into the subordination agreement. (Ibid.)

On January 26, 2016, the Kokes received financing from Bank and were able to close escrow for the purchase of the Property. (FAC, ¶ 15.) On the same day, the Marinellis received the return of their plans with the City’s markups for the submittals to correct the Violation. (Ibid.)

After taking no action to utilize the Marinellis’ plan submittals and letting those plan permits expire, on December 14, 2016, the Kokes served Fransen with a 60-day notice to cure which required that Fransen cease operating a dog boarding and dog-grooming facilities on the Property and for remodeling which Fransen allegedly completed and which was required by the tenant under the lease. (FAC, ¶ 17.) In the same notice, the Kokes elected to cure the default that results from plaintiff’s failure to obtain proper permits in connection with the remodel, by which the only cure required of Fransen was the default from operation of the dog boarding and dog-grooming facilities on the Property by February 14, 2016. (Ibid.)

Before the expiration of the cure period, defendants served Fransen with a 20-day notice to vacate. (FAC, ¶ 18.) The notice also stated that the Kokes elected to declare a forfeiture of the lease and asserted that the unpermitted remodel work constituted a “casualty” under the terms of the lease. (FAC, ¶ 19.) After removing the dog boarding and dog-grooming facilities on the Property as required under the 60-day notice, on January 27, 2017, Fransen moved out of the Property pursuant to the 20-day notice to vacate. (FAC, ¶ 20.)

On March 10, 2017, the Kokes sent correspondence to Fransen stating that they intended to seek reimbursement of the $77,000 cost related to the unpermitted remodel work that the Kokes claimed constituted a casualty under the lease. (FAC, ¶ 21.)

As a condition of securing the loan, the Kokes were required to obtain insurance for losses related to a casualty. (FAC, ¶ 21.) Because of the subordination agreement, the insurance proceeds could and would be used by Bank to reduce the debt owed by the Kokes instead of paying for the rebuilding of the building. (Ibid.)

(2)        Procedural History of Pleadings

On March 23, 2017, Fransen filed her original complaint in this action.

On July 7, 2017, the Kokes filed a demurrer and motion to strike as to the original complaint, which was scheduled for hearing on August 9, 2017. Upon written stipulation and order, the hearing was continued to September 13.

On August 31, 2017, Bank filed both an answer to the original complaint and a motion for judgment on the pleadings, scheduled for hearing on October 4.

On September 7, 2017, Fransen filed her first “First Amended Complaint,” without leave having been obtained from the court.

On September 20, 2017, the court ordered the first “First Amended Complaint” stricken as improperly filed, sustained the demurrer to the original complaint with leave to amend, and granted the motion to strike portions of the original complaint with leave to amend.

On October 4, 2017, the court continued the motion for judgment on the pleadings, anticipating the filing of a “second amended complaint” in conformance with the court’s prior grant of leave to amend.

On October 20, 2017, Fransen filed her second “First Amended Complaint” (so called notwithstanding the court’s request that it be labeled as a “second amended complaint” to avoid confusion). The FAC asserts four causes of action: (1) fraud; (2) negligent misrepresentation; (3) wrongful eviction; and, (4) breach of the covenant of quiet enjoyment. The first cause of action is asserted against all defendants; all other causes of action are asserted only against the Kokes.

On November 15, 2017, Bank filed its demurrer to the FAC.

On November 17, 2017, the Kokes filed their demurrer and motion to strike as to the FAC.

Both demurrers are opposed by Fransen. Fransen has not filed opposition to the motion to strike.

(3)        Discovery Motions

Originally also scheduled for this hearing were three motions to compel filed by plaintiff Fransen against defendant Rene Koke. These motions have been taken off calendar at the request of the parties.

Analysis:

(1)        Demurrer of Bank

“The rules by which the sufficiency of a complaint is tested against a general demurrer are well settled. We not only treat the demurrer as admitting all material facts properly pleaded, but also ‘give the complaint a reasonable interpretation, reading it as a whole and its parts in their context.’” (Yanting Zhang v. Superior Court (2013) 57 Cal.4th 364, 370, internal quotation marks and citations omitted.)

Bank demurs to the first cause of action for fraud, the only cause of action asserted against Bank. Bank argues that elements of fraud are not adequately alleged. “The elements of fraud, which give rise to the 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.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.) “In California, fraud must be pled specifically; general and conclusory allegations do not suffice.” (Id. at p. 645.)

The misrepresentation alleged by Fransen is in the subordination agreement, which is alleged to state that “ ‘the parties desire to subordinate [Plaintiff’s] leasehold interest in the Property to the lien of the Deed of Trust and to assure [Plaintiff] possession of the Property for the entire term of the Lease.” (FAC, ¶ 14, emphasis omitted.) Bank argues that this is not a misrepresentation of fact capable of supporting a cause of action for fraud.“ ‘It is hornbook law that an actionable misrepresentation must be made about past or existing facts; statements regarding future events are merely deemed opinions. [Citations.]’ [Citations.]” (Neu-Visions Sports, Inc. v. Soren/McAdam/Bartells (2000) 86 Cal.App.4th 303, 309-310.)

“There are, however, three recognized exceptions to the general rule: (1) where a party holds himself out to be specially qualified and the other party is so situated that he may reasonably rely upon the former’s superior knowledge; (2) where the opinion is by a fiduciary or other trusted person; (3) where a party states his opinion as an existing fact or as implying facts which justify a belief in the truth of the opinion. [Citation.]” (Borba v. Thomas (1977) 70 Cal.App.3d 144, 152.) Fransen argues that Bank’s representation of its intention to assure plaintiff possession of the Property for the entire term of the Lease was a false representation of its then-present intention based upon this third exception.

Misrepresentation of present intention is actionable where the misrepresented intent is to do or not to do something. (See Yield Dynamics, Inc. v. TEA Systems Corp. (2007) 154 Cal.App.4th 547, 575; see also Rest.2d Torts, § 530(1).) The misrepresentation asserted here is not that Bank was to assure Fransen’s possession of the Property for the entire term of the lease, only that Bank desired to assure Fransen’s possession of the Property. There are no allegations that Bank make any promises regarding Fransen’s possession of the Property or, for that matter, made any promises to do or not to do anything that Bank failed to do or not to do. In the absence of any allegation regarding a promise to perform, the Bank’s representation of its mere desire is in the nature of an opinion that will not support a claim for fraud. The court will sustain the demurrer on this ground.

It is unclear whether, or to what extent, Fransen can state a claim against Bank. Nonetheless, the court will grant leave to amend as requested by Fransen.

(2)        Demurrer of Kokes

The Kokes demur to the first, second, and third causes of action. In support of their demurrer, the Kokes request judicial notice of the recorded subordination agreement. The court grants the request. (See Poseidon Development, Inc. v. Woodland Lane Estates, LLC (2007) 152 Cal.App.4th 1106, 1117.)

With respect to the first cause of action for fraud and to the second cause of action for negligent misrepresentation, the same analysis set forth above applies with equal force here. The demurrer will be sustained on that ground. In opposition, Fransen makes a number of arguments to the effect that the claim is one of promissory fraud or rescission/ restitution as against the Kokes. To the extent Fransen is able, she may provide appropriate allegations in an amended complaint as to promissory fraud or rescission/ restitution. The court expresses no opinion as to whether claims, as amended, may be adequately pleaded on either theory.

Fransen’s third cause of action is for wrongful eviction. The Kokes assert that the elements of wrongful eviction require forcible entry. “The statutory remedies are not exclusive. Quite apart from the [forcible detainer] statutes, ‘a person in peaceable possession of real property may recover, in an action sounding in tort, damages for injuries to his person and goods caused by the forcible entry of one who is, or claims to be, the lawful owner or possessor....’ [Citations.]” (Spinks v. Equity Residential Briarwood Apartments (2009) 171 Cal.App.4th 1004, 1039.)

Fransen argues that wrongful eviction is alleged both as forcible eviction by a change of locks and by bad faith termination of tenancy. A fair reading of paragraph 37 of the FAC regarding the change of locks is that the change of locks occurred after Fransen had vacated the Property. As now alleged, the FAC does not allege that the change of the locks was to effect Fransen’s eviction of the Property rather than to secure the Property after Fransen had vacated. The allegations are not sufficient to support a claim for wrongful eviction on this basis.

Alternatively, Fransen asserts wrongful eviction by bad faith termination of the tenancy. “[I]n order for plaintiff to recover damages for constructive unlawful eviction, or on any conceivable appropriate theory, it was incumbent upon him to establish bad faith by defendants ….” (Lindenberg v. MacDonald (1950) 34 Cal.2d 678, 683.) The Kokes agree that bad faith issuance of a notice to vacate is grounds for a wrongful eviction claim (Reply, p. 5), but argue that there are insufficient allegations of bad faith. Fransen alleges that the Kokes issued both a 60-day notice to cure and a 20-day notice to vacate. (FAC, ¶¶ 17-19.) Fransen complied with the 60-day notice and cured the default asserted by removing the dog boarding and dog-grooming facilities. (FAC, ¶¶ 19-20.) Nonetheless, the 20-day notice to vacate was based upon a declaration of forfeiture of the lease on the basis of unpermitted construction that the Kokes knew was not the responsibility of Fransen. (FAC, ¶¶ 10, 12, 13, 16, 40.) Instead, the motive of the Kokes was to evict Fransen because the lease provided for below-market rent. (FAC, ¶ 39.) This is a sufficient allegation of bad faith. The demurrer on that ground will be overruled.

(3)        Motion to Strike

“The court may, upon a motion made pursuant to Section 435, or at any time in its discretion, and upon terms it deems proper: (a) Strike out any irrelevant, false, or improper matter inserted in any pleading.” (Code Civ. Proc., § 436.) “Irrelevant matter” includes a “demand for judgment requesting relief not supported by the allegations of the complaint.” (Code Civ. Proc., § 431.10, subds. (b)(3), (c).) “The grounds for a motion to strike shall appear on the face of the challenged pleading or from any matter of which the court is required to take judicial notice.” (Code Civ. Proc., § 437, subd. (a).)

The Kokes move to strike all or portions of paragraphs 27, 42, and 47 of the text of the FAC and paragraphs 4 and 6 of the prayer. Paragraph 27 is in the first cause of action for which the court sustains the Kokes’ demurrer. The motion to strike is denied as moot as to paragraph 27.

Paragraph 42 alleges that the acts and conduct of the defendants was malicious, fraudulent and oppressive. The Kokes argue that the allegations are conclusory and insufficient to support punitive damages. “Malicious,” “fraudulent,” and “oppressive” are defined by Civil Code section 3294, subdivision (c). While the court has determined that the allegations of the FAC are sufficient to show bad faith, “malicious,” “fraudulent,” and “oppressive” are not synonymous with bad faith and more must be alleged to meet these statutory definitions. The motion to strike will be granted, with leave to amend, as to paragraph 42 of the text and as to paragraph 6 of the prayer.

Paragraph 47 contains an allegation seeking punitive damages as part of the fourth cause of action for breach of the covenant of quiet enjoyment. As pleaded, the fourth cause of action is a contract action. (See Nativi v. Deutsche Bank National Trust Company (2014) 223 Cal.App.4th 261, 293.) Punitive damages are not recoverable in a contract action. (Civ. Code, § 3294, subd. (a).) The motion to strike will be granted as to paragraph 47.

Paragraph 4 of the prayer is for attorney fees. “[R]ecoverable litigation costs do include attorney fees, but only when the party entitled to costs has a legal basis, independent of the cost statutes and grounded in an agreement, statute, or other law, upon which to claim recovery of attorney fees.” (Santisas v. Goodin (1998) 17 Cal.4th 599, 606.) The FAC does not contain any allegations showing that attorney fees are recoverable. As pleaded, the FAC does not support the prayer for attorney fees. The motion will be granted as to paragraph 4.

Plaintiff will be granted leave to amend.

 
© Superior Court of the County of Santa Barbara
Locations & Contact Info | Court Security | Human Resources | Privacy Policy | ADA