HORIZON TIRE, INC. VS TROTTA TIRES II, LLC

Tentative Rulings

Case Number: 22PSCV00585 Hearing Date: May 24, 2023 Dept: G

Cross-Defendants Horizon Tire, Inc., Brian Han, and Vivienne Wang’s Demurrer to Cross-Complainant Trotta Tires II, LLC’s Second Amended Cross-Complaint

Respondent: Cross-Complainant Trotta Tires II, LLC

TENTATIVE RULING

Cross-Defendants Horizon Tire, Inc., Brian Han, and Vivienne Wang’s Demurrer to Cross-Complainant Trotta Tires II, LLC’s Second Amended Cross-Complaint is OVERRULED.

Cross-Defendants Horizon Tire, Inc., Brian Han, and Vivienne Wang are ordered to file an answer to the Second Amended Cross-Complaint in ten (10) days.

BACKGROUND

This is a breach of contract action arising from a credit agreement. On March 26, 2019, Horizon Tire, Inc. (Horizon Tire) entered into a written agreement with Trotta Tires II, LLC (Trotta Tires) in which Horizon Tire agreed to extend credit to Trotta Tires for the purchase of tires. Horizon Tire alleges Trotta Tires breached the agreement by failing to make payments pursuant to the agreement, starting September 16, 2021, and currently owes $458,661.66.

On June 15, 2022, Horizon Tire filed a complaint against Trotta Tires and Does 1-100, alleging the following causes of action: (1) breach of written contract, (2) common counts, (3) account stated, and (4) open book account. On August 24, Trotta Tires demurred to Horizon Tire’s complaint. On October 7, Horizon Tire responded by filing a First Amended Complaint (FAC) against the same defendants that omitted the second cause of action for common counts.

On November 14, 2022, Trotta Tires (Cross-Complainant) filed a cross-complaint against Horizon Tire, Vivienne Wang (Wang), Brian Han (Han, collectively, Cross-Defendants), and Roes 1-100, alleging the following causes of action: (1) declaratory relief, (2) declaratory relief, (3) negligence, and (4) fraud.

On January 3, 2023, Cross-Complainant filed a First Amended Cross-Complaint (FACC) against the same parties alleging the same causes of action. On March 6, the court sustained Cross-Defendants’ demurrer to Cross-Complainant’s FACC with leave to amend.

On March 27, 2023, Cross-Complainant filed a Second Amended Cross-Complaint (SACC) against the same parties alleging (1) declaratory relief, (2) negligent misrepresentation, and (3) fraud.

On April 26, 2023, Cross-Defendants filed the present demurrer. Prior to filing on April 3, Cross-Defendants’ counsel met and conferred telephonically with Cross-Complainant’s counsel and was unable to reach a resolution. (Neer Decl., 2.)

A hearing on the demurrer is set for May 24, 2023, with a mandatory settlement conference on October 5 and a post-mediation status conference/further case management conference on October 18.

ANALYSIS

Cross-Defendants demur to Cross-Complainant’s entire SACC. For the following reasons, the court OVERRULES the demurrer.

Legal Standard

A party may demur to a complaint on the grounds that it “does not state facts sufficient to constitute a cause of action.” (Code Civ. Proc., 430.10, subd. (e).) A demurrer tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747 (Hahn).) When considering demurrers, courts accept all well pleaded facts as true. (Fox v. JAMDAT Mobile, Inc. (2010) 185 Cal.App.4th 1068, 1078.) In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed.” (SKF Farms v. Superior Court (1984) 153 Cal.App.3d 902, 905.) “The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action.” (Hahn, supra, at p. 747.)

Declaratory Relief (First Cause of Action)

Cross-Defendants argue Cross-Complainant’s first cause of action for declaratory relief fails to plead sufficient facts to state a claim. The court disagrees.

Legal Standard

“To qualify for declaratory relief, a party would have to demonstrate its action presented two essential elements: (1) a proper subject of declaratory relief, and (2) an actual controversy involving justiciable questions relating to the party’s rights or obligations.” (Jolley v. Chase Home Finance, LLC (2013) 213 Cal.App.4th 872, 909, quotation marks and brackets omitted.) “The courts do not issue advisory opinions about the rights and duties of the parties under particular agreements, if no actual, justiciable controversy has yet developed.” (Otay Land Co. v. Royal Indemnity Co. (2008) 169 Cal.App.4th 556, 563.)

Discussion

In this case, Cross-Defendants argue declaratory relief is not proper here because there is not a present controversy as this case involves previous wrongs. In response, Cross-Complainant argues the purpose of declaratory relief here is to determine if Cross-Complainant has the right to be indemnified during these proceedings. In reply, Cross-Defendants argues this is an improper attempt to receive an advisory opinion on whether Cross-Complainant can seek indemnity. However, the court disagrees as declaratory relief in a cross-complaint is in fact the proper means for seeking indemnity. (Valley Circle Estates v. VTN Consolidated, Inc. (1983) 33 Cal.3d 604, 612 [“[A] cross-complaint for indemnity properly takes the form, adopted by defendant in the present case, of an action for declaratory relief.”]).

Thus, because there is a present controversy over whether Cross-Complainant is entitled to indemnity and that issue is a proper subject for declaratory relief, the court OVERRULES Cross-Defendants’ demurrer to this cause of action.

Negligent Misrepresentation and Fraud (Second and Third Causes of Action)

Cross-Defendants contend Cross-Complainant’s second cause of action for negligent misrepresentation and third cause of action for fraud fail to plead sufficient facts to state a claim. The court disagrees.

Legal Standard

“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 (Lazar), quoting 5 Witkin, Summary of Cal. Law (9th ed. 1988) Torts, 676, p. 778.) The facts constituting the alleged fraud must be alleged factually and specifically as to every element of fraud, as the policy of “liberal construction” of the pleadings will not ordinarily be invoked. (Id., at p. 645.) Similarly, “[t]he elements of negligent misrepresentation are ‘(1) the misrepresentation of a past or existing material fact, (2) without reasonable ground for believing it to be true, (3) with intent to induce another’s reliance on the fact misrepresented, (4) justifiable reliance on the misrepresentation, and (5) resulting damage.’” (National Union Fire Ins. Co. of Pittsburg, PA v. Cambridge Integrated Services Group, Inc. (2009) 171 Cal.App.4th 35, 50 (National Union), quoting Apollo Capital Fund LLC v. Roth Capital Partners, LLC (2007) 158 Cal.App.4th 226, 243.)

Discussion

In this case, the SACC alleges Cross-Defendants sent Cross-Complainant an email on October 15, 2021, with wiring instructions for Cross-Complainant to make payments for Horizon Tire to a Capital One bank account. (SACC, 9.) The wiring instructions were confirmed by two additional emails on November 1 and 3. (SACC, 9.) The SACC then alleges that these communications were misrepresentations as Horizon Tire did not have a Capital One bank account. (SACC, 12, 22.) In their demurrer, Cross-Defendants contend these allegations are contradicted by the copies of the actual email communications attached to the FACC. Specifically, they claim the emails did not come from “horizontire.com,” Cross-Defendants’ alleged email domain name, and instead came from “horlzontire.com,” an alleged unknown third party with an email domain name that was similar to Cross-Defendants’.

In reviewing a complaint, the court gives it “a reasonable interpretation and treat[s] the demurrer as admitting all material facts properly pleaded that are not inconsistent with other allegations, exhibits, or judicially noticed facts.” (Morris v. JPMorgan Chase Bank, N.A. (2022) 78 Cal.App.5th 279, 292.)

Here, the court finds the SACC’s allegations are not inconsistent with the attached email exhibits for two reasons. First, the court is unaware of any allegation in the SACC or judicially noticeable fact that establishes “horizontire.com” as Cross-Defendants’ email domain name. Second, the court is unaware of any allegation in the SACC or judicially noticeable fact that establishes the “horlzontire.com” email domain name is owned by an unknown third party as Cross-Defendants claim in their demurrer. Thus, because the court must accept the SACC’s well-pleaded allegations as true, Cross-Defendants’ contrary allegations have no merit. While Cross-Defendants remain free to introduce evidence later on that establishes they did not send these emails, a determination of such issues of fact is not proper in proceedings on a demurrer.

Accordingly, Cross-Defendants’ demurrer to Cross-Complainant’s second and third causes of action is OVERRULED.

CONCLUSION

Based on the foregoing, Cross-Defendants’ demurrer to Cross-Complainant’s SACC is OVERRULED.

Cross-Defendants Horizon Tire, Inc., Brian Han, and Vivienne Wang are ordered to file an answer to the Second Amended Cross-Complaint in ten (10) days.

Case Number: 22PSCV00585 Hearing Date: March 6, 2023 Dept: G

Cross-Defendants Horizon Tire, Inc, Brian Han, and Vivienne Wang’s Demurrer to Cross-Complainant Trotta Tires II, LLC’s First Amended Cross-Complaint

Respondent: Cross-Complainant Trotta Tires II, LLC

TENTATIVE RULING

Cross-Defendants Horizon Tire, Inc, Brian Han, and Vivienne Wang’s Demurrer to Cross-Complainant Trotta Tires II, LLC’s First Amended Cross-Complaint is SUSTAINED with twenty (20) days leave to amend.

BACKGROUND

This is a breach of contract action arising from a credit agreement. On March 26, 2019, Horizon Tire, Inc. (Horizon Tire) entered into a written agreement with Trotta Tires II, LLC (Trotta Tires) in which Horizon Tire agreed to extend credit to Trotta Tires for the purchase of tires. Horizon Tire alleges Trotta Tires breached the agreement by failing to make payments pursuant to the agreement, starting September 16, 2021, and currently owes $458,661.66.

On June 15, 2022, Horizon Tire filed a complaint against Trotta Tires and Does 1-100, alleging the following causes of action: (1) breach of written contract, (2) common counts, (3) account stated, and (4) open book account. On August 24, Trotta Tires demurred to Horizon Tire’s complaint. On October 7, Horizon Tire responded by filing a First Amended Complaint (FAC) against the same defendants that omitted the second cause of action for common counts.

On November 14, 2022, Trotta Tires (Cross-Complainant) filed a cross-complaint against Horizon Tire, Vivienne Wang (Wang), Brian Han (Han, collectively, Cross-Defendants), and Roes 1-100, alleging the following causes of action: (1) declaratory relief, (2) declaratory relief, (3) negligence, and (4) fraud.

On January 3, 2023, Cross-Complainant filed a First Amended Cross-Complaint (FACC) against the same parties alleging the same causes of action.

On January 30, 2023, Cross-Defendants filed the present demurrer. Prior to filing on January 3, Cross-Defendants’ counsel met and conferred telephonically with Cross-Complainant’s counsel and was unable to reach a resolution. (Neer Decl., 2.)

A hearing on the demurrer, case management conference, and OSC re: Default/Default Judgment are set for March 6, 2023.

ANALYSIS

Cross-Defendants demur to Cross-Complainant’s entire FACC. For the following reasons, the court SUSTAINS the demurrer.

Legal Standard

A party may demur to a complaint on the grounds that it “does not state facts sufficient to constitute a cause of action.” (Code Civ. Proc., 430.10, subd. (e).) A demurrer tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747 (Hahn).) When considering demurrers, courts accept all well pleaded facts as true. (Fox v. JAMDAT Mobile, Inc. (2010) 185 Cal.App.4th 1068, 1078.) In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed.” (SKF Farms v. Superior Court (1984) 153 Cal.App.3d 902, 905.) “The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action.” (Hahn, supra, at p. 747.)

Declaratory Relief (First and Second Causes of Action)

Cross-Defendants argue Cross-Complainant’s first and second causes of action for declaratory relief fail to plead sufficient facts to state a claim. The court agrees.

“To qualify for declaratory relief, a party would have to demonstrate its action presented two essential elements: (1) a proper subject of declaratory relief, and (2) an actual controversy involving justiciable questions relating to the party’s rights or obligations.” (Jolley v. Chase Home Finance, LLC (2013) 213 Cal.App.4th 872, 909, quotation marks and brackets omitted.) “The courts do not issue advisory opinions about the rights and duties of the parties under particular agreements, if no actual, justiciable controversy has yet developed.” (Otay Land Co. v. Royal Indemnity Co. (2008) 169 Cal.App.4th 556, 563.)

In this case, Cross-Defendants contend declaratory relief is improper because this case only involves alleged past wrongs. Cross-Defendants argue Filarsky v. Superior Court (2002) 28 Cal.4th 419 (Filarsky) is instructive. There, the supreme court held it was reversible error for the trial court to grant a city’s request for declaratory relief on a dispute over a public records request. (Id., at p. 423.) In so reasoning, the court recognized it was improper for the trial court to grant declaratory relief pursuant to Code of Civil Procedure section 1060 when the California Public Records Act provided specific procedures for public records disputes. (Id., at p. 428-429.) In this matter, however, Cross-Defendants fail to identify another statutory scheme that would displace the availability of ordinary declaratory relief.

Nevertheless, it is well established that declaratory relief “operates prospectively, and not merely for the redress of past wrongs. It serves to set controversies at rest before they lead to repudiation of obligations, invasion of rights or commission of wrongs; in short, the remedy is to be used in the interests of preventive justice, to declare rights rather than execute them.” (Travers v. Louden (1967) 254 Cal.App.2d 926, 931.) Thus, when a plaintiff or cross-complainant seeks a remedy for a past wrong, such as a foreclosure sale, the party fails allege an actual, present controversy and fails to state a claim for relief. (Orcilla v. Big Sur, Inc. (2016) 244 Cal.App.4th 982, 1014.)

Here, Cross-Complainant’s first cause of action for declaratory relief seeks a judicial declaration establishing Horizon Tire constructively received funds that Cross-Complainant sent to a different bank account. (FACC, 14.) However, the inescapable conclusion here is that this cause of action’s only function is to settle Cross-Complainant’s liability for an alleged failure to tender payment to Horizon Tire. Cross-Complainant’s second cause of action is repetitive of the first and seeks a judicial declaration requiring Cross-Defendants to indemnify Cross-Complainant in the event Cross-Complainant is found liable for failing to make the payments. (FACC, 17-19.) Neither cause of action establishes the existence of any actual and present controversy.

Accordingly, Cross-Defendants’ demurrer to Cross-Complainant’s first and second causes of action is SUSTAINED with leave to amend.

Negligence (Third Cause of Action)

Cross-Defendants contend Cross-Complainant’s third cause of action for negligence fails to plead sufficient facts to state a claim. The court agrees.

The basic of elements of a negligence claim are (1) duty, (2) breach, (3) causation, and (4) damages. (Leslie G. v. Perry & Associates (1996) 43 Cal.App.4th 472, 480.) In this case, Cross-Defendants claim the FACC fails to establish duty and breach. The court agrees, finding this allegation is vaguely pled and unclear.

Cross-Complainant contends the FACC adequately pled Cross-Defendants owed a duty pursuant to the implied covenant of good faith and fair dealing in paragraph 21. However, paragraph 21 merely states “[w]hen Trotta [Tires] and Horizon [Tire] entered into a business relationship for the purchase and sale of automobile tires, they agreed to refrain from engaging in any conduct that would interfere with either party’s ability to profit from that relationship.” (FACC, 21.)

“It is well established a breach of the implied covenant of good faith is a breach of the contract.” (Carson v. Mercury Ins. Co. (2012) 210 Cal.App.4th 409, 429.) Furthermore, a “plaintiff may not recover in tort based solely on allegations that [Defendant] negligently performed its contractual duties.” (Archer v. Coinbase, Inc. (2020) 53 Cal.App.5th 266, 278.) Thus, because Cross-Complainant’s negligence claim is based on a duty to perform under the parties’ credit agreement and does not identify any other independent duty from the contract, it fails to state a claim.

Accordingly, Cross-Defendants’ demurrer to Cross-Complainant’s third cause of action is SUSTAINED with leave to amend.

Fraud (Fourth Cause of Action)

Cross-Defendants maintain Cross-Complainant’s fourth cause of action for fraud fails to plead sufficient facts to state a claim. The court agrees.

“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, quoting 5 Witkin, Summary of Cal. Law (9th ed. 1988) Torts, 676, p. 778.) The facts constituting the alleged fraud must be alleged factually and specifically as to every element of fraud, as the policy of “liberal construction” of the pleadings will not ordinarily be invoked. (Id., at p. 645.)

In this case, the FACC vaguely alleges Horizon Tire, through Wang and Han, instructed Cross-Complainant via email to make payments to a Capital One Bank account “in or about Autumn 2021.” (FACC, 9.) The court finds “Autumn 2021” lacks the required specificity and is too vague of an allegation to establish when Horizon made this alleged misrepresentation. Second, while Cross-Complainant alleges the representation that Horizon Tire had a Capital One Bank account was false and that Cross-Defendants intended for Cross-Complainant to rely on these representations, Cross-Complainant did not specifically allege that Cross-Defendants had knowledge that their statement was false and intended to defraud or induce reliance. (FACC, 25, 27.) Finally, as a result of Cross-Complainant’s lack of specificity, the FACC is contradictory insofar as it alleges “Trotta [Tires] could not, in the exercise of reasonable care, have discovered such falsity” (FACC, 27) despite previously alleging Trotta Tires did in fact learn Capital One Bank has no account for Horizon Tire. (FACC, 12.) Thus, the FACC fails to plead fraud with the required specificity.

Accordingly, Cross-Defendants’ demurrer to Cross-Complainant’s fourth cause of action is SUSTAINED with leave to amend.

CONCLUSION

Based on the foregoing, Cross-Defendants’ demurrer to the FACC is SUSTAINED in its entirety with twenty (20) days leave to amend.