defendant vanguard properties incs notice of demurrer and demurrer to

Cal. Super. - 1st Dist.November 4, 2021

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4880-6391-9105.3 DEFENDANT VANGUARD PROPERTIES, INC.’S DEMURRER TO FIRST AMENDED COMPLAINT Jennifer Supman (State Bar No. 248302) jxs@manningllp.com Loan Dao (State Bar No. 321122) ltd@manningllp.com Mark Wilson (State Bar No. 293474) mxw@manningllp.com MANNING & KASS ELLROD, RAMIREZ, TRESTER LLP One California Street, Suite 900 San Francisco, California 94111 Telephone: (415) 217-6990 Facsimile: (415) 217-6999 Attorneys for Defendant, VANGUARD PROPERTIES, INC., a California corporation SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF SAN FRANCISCO 1367 NATOMA ST SF, LLC, a California limited liability company, Plaintiff, v. GJ CREATIVE EQUITY GROUP, a California limited liability company; VANGUARD PROPERTIES, INC., a California corporation; MICHAEL GALLIN; JENNIFER JONES; DOES 1-50, inclusive, Defendants. Case No. CGC-20-588514 DEFENDANT VANGUARD PROPERTIES, INC.’S NOTICE OF DEMURRER AND DEMURRER TO FIRST AMENDED COMPLAINT OF PLAINTIFF 1367 NATOMA ST SF, LLC; MEMORANDUM OF POINTS AND AUTHORITIES Hearing Date: December 8, 2021 Time: 9:30 a.m. Dept: 501 Action Filed: January 11, 2021 Trial Date: None set TO ALL PARTIES AND THEIR COUNSEL OF RECORD: PLEASE TAKE NOTICE THAT on December 8, 2021, at 9:30 a.m., or as soon thereafter as counsel may be heard, in Department 501 of the above-captioned Court, located at 400 McAllister Street, San Francisco, California, Defendant Vanguard Properties, Inc. (“Vanguard”) will and hereby does demur to the First Amended Complaint filed by Plaintiff 1367 NATOMA ST SF, LLC, pursuant to Code of Civil Procedure section 430.10, et seq. ELECTRONICALLY F I L E D Superior Court of California, County of San Francisco 11/01/2021 Clerk of the Court BY: EDNALEEN ALEGRE Deputy Clerk 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4880-6391-9105.3 2 DEFENDANT VANGUARD PROPERTIES, INC.’S DEMURRER TO FIRST AMENDED COMPLAINT This demurrer is based upon this Notice and Demurrer, the accompanying Memorandum of Points and Authorities, the Declaration and Request for Judicial Notice filed concurrently therewith, all of the pleadings, files, and records in this proceeding, all other matters of which the Court may take judicial notice, and any argument or evidence that may be presented to or considered by the Court prior to its ruling. This demurrer is made pursuant to Code of Civil Procedure section 430.10, et seq., on the ground that the first, third, and fourth causes of action alleged against Vanguard in the First Amended Complaint fail to state sufficient facts to constitute a cause of action. DATED: October 28, 2021 MANNING & KASS ELLROD, RAMIREZ, TRESTER LLP By: Jennifer Supman Attorneys for Defendant, VANGUARD PROPERTIES, INC., a California corporation 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4880-6391-9105.3 3 DEFENDANT VANGUARD PROPERTIES, INC.’S DEMURRER TO FIRST AMENDED COMPLAINT DEMURRER Pursuant to Code of Civil Procedure (“CCP”) sections 430.10, 430.30, 430.50 and 430.70, Defendant Vanguard Properties, Inc. (“Vanguard”) will and hereby does generally demur to the First Amended Complaint filed by Plaintiff 1367 NATOMA ST SF, LLC, on the following grounds: DEMURRER TO FIRST CAUSE OF ACTION The First Cause of Action (“Breach of Fiduciary Duty”) fails to state facts sufficient to constitute a cause of action against Vanguard. CCP § 430.10(e). DEMURRER TO THIRD CAUSE OF ACTION The Third Cause of Action (“Breach of Written Contract”) fails to state facts sufficient to constitute a cause of action against Vanguard. CCP § 430.10(e). DEMURRER TO FOURTH CAUSE OF ACTION The Fourth Cause of Action (“Fraud”) fails to state facts sufficient to constitute a cause of action against Vanguard. CCP § 430.10(e). WHEREFORE, Vanguard prays that: 1. The Demurrer be sustained without leave to amend; 2. The Court enter an order dismissing the action as to Vanguard; 3. Vanguard be awarded its costs of suit; and 4. The Court grant such other and further relief as the Court may deem proper. DATED: October 28, 2021 MANNING & KASS ELLROD, RAMIREZ, TRESTER LLP By: Jennifer Supman Attorneys for Defendant, VANGUARD PROPERTIES, INC., a California corporation 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4880-6391-9105.3 4 DEFENDANT VANGUARD PROPERTIES, INC.’S DEMURRER TO FIRST AMENDED COMPLAINT TABLE OF CONTENTS Page I. INTRODUCTION ..................................................................................................................7 II. STATEMENT OF FACTS .....................................................................................................8 III. LEGAL STANDARD FOR DEMURRER ..........................................................................11 IV. THE DEMURRER TO THE FIRST CAUSE OF ACTION IS PROPERLY SUSTAINED AS TO VANGUARD, WITHOUT LEAVE TO AMEND ...........................12 V. THE DEMURRER TO THE THIRD CAUSE OF ACTION IS PROPERLY SUSTAINED AS TO VANGUARD, WITHOUT LEAVE TO AMEND ...........................16 VI. THE DEMURRER TO THE FOURTH CAUSE OF ACTION IS PROPERLY SUSTAINED AS TO VANGUARD, WITHOUT LEAVE TO AMEND ...........................18 VII. CONCLUSION ....................................................................................................................20 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4880-6391-9105.3 5 DEFENDANT VANGUARD PROPERTIES, INC.’S DEMURRER TO FIRST AMENDED COMPLAINT TABLE OF AUTHORITIES Page CASES Ankey v. Lockheed Missile and Space Co. (1979) 88 Cal.App.3d 531 ........................................... 11 Award Metals, Inc. v. Superior Court (1991) 228 Cal.App.3d 1128 .............................................. 12 Barcelon v. Cortese (1969) Cal.App.2d 690 ................................................................................... 15 Blank v. Kirwan (1985) 39 Cal.3d 311 ............................................................................................ 11 Brakke v. Economic Concepts, Inc. (2013) 213 Cal.App.4th 761 ................................................... 20 Burnett v. Chimney Sweep (2004) 123 Cal.App.4th 1057 .............................................................. 17 Cantu v. Resolution Trust Corp. (1992) 4 Ca1.App.4th 857 .......................................................... 11 City of Hope Natl. Medical Center v. Genentech, Inc. (2008) 43 Cal.4th 375 ............................... 12 Daniels v. Select Portfolio Servicing, Inc. (2016) 246 Cal.App.4th 1150 ................................ 13, 14 Del E. Webb Corporation v. Structural Materials Company (1981) 123 Cal.App.3d 593 ............. 11 Dodd v. Citizens Bank of Costa Mesa, 222 Cal. App. 3d 1624 ....................................................... 11 Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350 ............................................................. 16 George v. Automobile Club of Southern California (2011) 201 Cal.App.4th 1112 ....................... 11 Graham v. Bank of America, N.A. (2014) 226 Cal.App.4th 594 ..................................................... 19 Harris v. Rudin, Richman & Appel (1999) 74 Cal.App.4th 299 ..................................................... 16 Hobart v. Hobart Estate Co. (1945) 26 Cal.2d 412 ........................................................................ 19 Mercury Casualty Co. v. Superior Court (1986) 179 Cal.App.3d 1027 ......................................... 16 Moore v. Morhar (1977) 65 Cal.App.3d 896 .................................................................................. 12 Ojavan Investors, Inc. v. California Coastal Com. (1997) 54 Cal.App.4th 373 ............................. 11 Perlas v. GMAC Mortgage, LLC (2010) 187 Cal.App.4th 429 ...................................................... 18 Pierce v. Lyman (1991) 1 Cal.App.4th 1093 ................................................................................... 12 Rosenbaum v. Rosenbaum (1967) 257 Cal.App. 2d 193 ................................................................. 15 Sackett v. Starr (1949) 95 Cal.App.2d 128 ..................................................................................... 16 Wilhelm v. Pray, Price, Williams & Russell (1986) 186 Cal.App.3d 1324 .................................... 19 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4880-6391-9105.3 6 DEFENDANT VANGUARD PROPERTIES, INC.’S DEMURRER TO FIRST AMENDED COMPLAINT Wolf v. Superior Court (2003) 107 Cal.App.4th 25 ........................................................................ 12 STATUTES Business & Professions Code section 10100.5(b) ........................................................................... 15 Business & Professions Code section 10177(h) .............................................................................. 15 CCP § 430.10(e) ................................................................................................................................ 3 CCP § 430.30(a) .............................................................................................................................. 11 Code Civ. Proc. (“CCP”) § 430.50(a) ............................................................................................. 11 Code Civ. Proc. § 430.50 ................................................................................................................ 11 Code of Civil Procedure (“CCP”) sections 430.10, 430.30, 430.50 and 430.70 .............................. 3 Code of Civil Procedure section 430.10 ............................................................................................ 1 TREATISES Miller & Starr, CA Real Estate 3d Ed. 2011, 5:11, 5-62 (citing 5:12.) ........................................... 15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4880-6391-9105.3 7 DEFENDANT VANGUARD PROPERTIES, INC.’S DEMURRER TO FIRST AMENDED COMPLAINT MEMORANDUM OF POINTS AND AUTHORITIES I. INTRODUCTION This case arises from the development of tenancy-in-common ("TIC") interests in the real property located at 1367 Natoma in San Francisco (“Subject Property”). Plaintiff 1367 NATOMA ST SF, LLC (“Plaintiff”), the owner of the Subject Property, alleges that it engaged Defendant GJ Creative Equity Group, LLC ("Creative Equity") to consult with respect to the conversion of the Subject Property from apartments into TIC interests. Plaintiff alleges that on or about September 2017, it entered into a written contract with defendant Creative Equity. Plaintiff alleges that the contract was drafted by Creative Equity and signed by Mike Gallin ("Gallin") and Jennifer Jones ("Jones") on behalf of Creative Equity. Plaintiff alleges that under the contract, Creative Equity agreed to generally supervise and facilitate the conversion of the Subject Property from apartments into TIC interests and carry out specific tasks in furtherance of the creation of the TIC interests. Plaintiff alleges that Jones and Gallin breached the written contract entered into between Creative Equity and Plaintiff (which is attached as Exhibit A to the First Amended Complaint) by, among other things, allegedly underestimating the scope and cost of construction, hiring “incompetent” contractors, misrepresenting the progress and status of the project, failing to competently oversee the project, and making “unauthorized” promises to potential buyers regarding future improvements to the Subject Property. Although Vanguard Properties, Inc. (“Vanguard”) is named as a defendant in the instant action, the only fact alleged as against Vanguard is that the members of Creative Equity, i.e., Gallin and Jones, were affiliated with Vanguard at the time they provided TIC consultation services to Plaintiff on behalf of Creative Equity. A review of the four corners of the First Amended Complaint ("FAC") unequivocally confirms that Vanguard was not a party to the contract, Vanguard owed no duties to Plaintiff under the contract, Vanguard owed no fiduciary duty to Plaintiff, Vanguard did not earn any compensation under the contract, the contract was not a listing agreement, Vanguard owed no duty to supervise Gallin and Jones in connection with the work they performed on behalf of Creative Equity (as opposed to Vanguard), and Plaintiff has not been 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4880-6391-9105.3 8 DEFENDANT VANGUARD PROPERTIES, INC.’S DEMURRER TO FIRST AMENDED COMPLAINT damaged. As explained more fully below, all causes of action alleged against Vanguard necessarily fail. Specifically, the first cause of action for breach of fiduciary duty fails as against Vanguard, as Vanguard was not Plaintiff’s fiduciary, did not agree to act as Plaintiff’s fiduciary, and the complaint is devoid of any such contentions. The third cause of action for breach of written contract fails as against Vanguard, as the contract attached to the FAC, which forms the basis of this cause of action, reveals that: Vanguard is not a party to the contract; Vanguard owed no duties to Plaintiff under the contract; Vanguard did not earn any compensation under the contract; the contract was not a listing agreement; the contract makes no reference to Vanguard; and the contract is not signed by or on behalf of Vanguard. The fourth cause of action for fraud fails as against Vanguard, as it is not plead with the requisite specificity, as it does not allege who from Vanguard made any allegedly fraudulent statements, to whom they spoke, and most importantly, that they had the authority to speak on behalf of Vanguard. Moreover, California law is clear that the statements that form the basis for the fraud cause of action are non-actionable statements of opinion. Accordingly, the demurrer to the first, third and fourth causes of action is properly sustained, without leave to amend. II. STATEMENT OF FACTS Plaintiff alleges that, on or about September 2017, it entered into a written contract with defendant Creative Equity. FAC §¶ 8. Plaintiff alleges that the contract was drafted by Creative Equity and signed by Gallin and Jones on behalf of Creative Equity. Id. Plaintiff alleges that under section 2 of the contract, Creative Equity agreed to generally supervise and facilitate the conversion of the Subject Property from apartments into TIC interests. Id. Plaintiff alleges that section 2 of the contract required Creative Equity to (i) coordinate efforts to secure vacancy of all units in the Subject Property in preparation for renovation and sale; (ii) recommend repairs and improvements to enhance the Subject Property's marketability, and oversee and coordinate the work approved by Plaintiff; (iii) if the Subject Property contains more than five units, coordinate efforts to obtain a Public Report from the California Bureau of Real Estate 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4880-6391-9105.3 9 DEFENDANT VANGUARD PROPERTIES, INC.’S DEMURRER TO FIRST AMENDED COMPLAINT that authorizes Owner to sell TIC interests; and (iv) coordinate efforts to market and sell the TIC interests. See also FAC, Ex. A, § 2. Additionally, the contract confirms that Creative Equity will use the services of attorneys, accountants, contractors, and other professionals to perform the services required under the contract (see FAC Ex. A, § 2); that all associated costs shall be paid by Plaintiff (see FAC Ex. A, § 2); that Plaintiff shall retain final decision-making authority on all aspects of the ownership, development and sale of the TIC interests and the Subject Property (see FAC Ex. A, § 2); and that Creative Equity is not ultimately responsible for the work done by the third parties or services providers it recommends (see FAC Ex. A, § 5). The contract further provides that Plaintiff shall compensate Creative Equity for the services Creative Equity provides, by: (1) paying Creative Equity 10% of Plaintiff's profit from the development project on the sale of the last TIC interest, or on the date the Plaintiff sells the Subject Property in its entirety (see FAC, Ex. A, § 3(A)); and (2) paying Creative Equity (or a real estate brokerage designated by them) 6% of the gross sales price of the TIC interest at the Subject Property upon escrow close "as part of the total compensation to Creative [Equity] and its principals for consulting services, and is therefore payable regardless of whether or not [Plaintiff] (i) chooses to list the TIC Interests or the [Subject] Property with the Creative [Equity] principals, and (ii) allows the Creative [Equity] principals to act as [Plaintiff's] sales agents for a sale each of the TIC Interests or the [Subject] Property … If the Creative [Equity] principals do not act as [Plaintiff's] sales agents in the sale of any TIC Interest or the [Subject] Property, Plaintiff shall pay to Creative [Equity] 6 % of the gross sales price of each such TIC Interest, or 6% of the gross sales price of the entire Property, at the time it is sold, and such payment shall be required regardless of whether Plaintiff has paid, or is paying, a sales commission to another person or firm (see FAC, Ex. A, § 3(B))." Emphasis added. Plaintiff then alleges that Vanguard and Creative Equity breached the contract (despite the fact that Vanguard was not a party to the contract and is not alleged to have had any duties to Plaintiff under the contract) by: (i) significantly underestimating the scope and cost of construction of the Subject Property; (ii) hiring incompetent contractors; (iii) misrepresenting the progress and status 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4880-6391-9105.3 10 DEFENDANT VANGUARD PROPERTIES, INC.’S DEMURRER TO FIRST AMENDED COMPLAINT of planning, permitting and undertaking of the construction; (iv) failing to competently oversee and manage the construction in a timely and cost-efficient manner with proper permits; (v) failing to competently oversee and manage construction which resulted in the issuance of numerous notices of violation; (vi) failing to ensure that the Subject Property was kept secure at all times; and (vii) failing to ensure that all demolition work was completed properly so that the Property was structurally sound. FAC ¶ 12. While Plaintiff attempts to expand the duties owed by Creative Equity under the contract, the contract itself confirms that Creative Equity was not charged with estimating the scope and cost of construction of the Subject Property, hiring contractors, managing the construction, keeping the Subject Property secure, ensuring that the demolition work was completed properly, or ensuring that the Subject Property was structurally sound. FAC, Ex. A, § 2. Indeed, Plaintiff's allegation of breach is barred by the express terms of the contract, which provides as follows: Creative Equity will use the services of attorneys, accountants, contractors, and other professionals to perform the services required under the contract (see FAC Ex. A, § 2); Plaintiff shall retain final decision-making authority on all aspects of the ownership, development and sale of the TIC interests and the Subject Property (see FAC Ex. A, § 2); and Creative Equity is not ultimately responsible for the work done by the third parties or services providers it recommends (see FAC Ex. A, § 5). Plaintiff alleges that as a result of Vanguard and Creative Equity's breach of the contract (to which Vanguard was not a party), Plaintiff suffered damages, including but not limited to: (i) increased interest costs, property taxes, insurance premiums and utility costs due to delays in selling the TIC interests; (ii) a decrease in the value of unsold TIC interests; and (iii) unnecessary construction costs far over budget. FAC ¶ 13. However, the contract bars Plaintiff from recovering the aforementioned damages from Creative Equity directly, and Vanguard vicariously, as it provides as follows, in pertinent part: "Creative [Equity] shall not be liable for consequential damages in any event, including but not limited to delays or denial caused by an administrative body or government agency. This clause shall supersede any clause of this Agreement, which may be deemed inconsistent with it, and shall survive the termination of this Agreement." FAC, Ex. A, § 5. Furthermore, the contract contains an indemnity provision in Creative Equity's favor, which 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4880-6391-9105.3 11 DEFENDANT VANGUARD PROPERTIES, INC.’S DEMURRER TO FIRST AMENDED COMPLAINT provides as follows, in pertinent part: "[Plaintiff] shall indemnify, defend and hold harmless Creative [Equity] and its principals from any lawsuit, liability, loss, cost, damage, claim, attorney fees or other expenses arising in whole or in part out of (i) injury to or death of persons, or damage to or loss of property, and any damage or loss suffered by any person, which is caused by the acts, omissions or neglect of Owner, (ii) defects of the Property, and (iii) any violation or non-compliance of the Property with any existing, developing or retro-active law or government regulation. FAC, Ex. A, § 5. III. LEGAL STANDARD FOR DEMURRER A demurrer “may be taken to the whole Complaint or to any of the causes of action stated therein.” Code Civ. Proc. (“CCP”) § 430.50(a). A general demurrer points out substantive pleading defects, such as failure to state a cause of action or affirmative defenses such as statute of limitations or waiver. CCP § 430.10(e); Ojavan Investors, Inc. v. California Coastal Com. (1997) 54 Cal.App.4th 373, 384, fn.8; Ankey v. Lockheed Missile and Space Co. (1979) 88 Cal.App.3d 531, 537. A demurrer is properly based on the complaint itself, as well as upon such matter as the Court is required to or may take judicial notice. CCP § 430.30(a). A complaint should be read as containing the judicially noticeable facts even when the pleading contains an express allegation to the contrary. Cantu v. Resolution Trust Corp. (1992) 4 Ca1.App.4th 857, 877. Courts will not close their eyes to situations where a complaint contains allegations contrary to facts which are judicially noticed. Del E. Webb Corporation v. Structural Materials Company (1981) 123 Cal.App.3d 593, 604. Similarly, facts appearing in exhibits attached to a complaint will be accepted as true and, if contrary to the allegations in the pleading, the facts appearing in the exhibits will be given precedence. Del E. Webb Corp. v. Structural Materials Co. (1981) 123 Cal.App.3d 593, 604; Dodd v. Citizens Bank of Costa Mesa, 222 Cal. App. 3d 1624, 1627. The Court assessing the demurrer accepts as true the facts pleaded in the complaint, but rejects contentions, deductions and conclusions of fact or law. Blank v. Kirwan (1985) 39 Cal.3d 311, 318; see also George v. Automobile Club of Southern California (2011) 201 Cal.App.4th 1112, 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4880-6391-9105.3 12 DEFENDANT VANGUARD PROPERTIES, INC.’S DEMURRER TO FIRST AMENDED COMPLAINT 1120 (while a demurrer “admits all facts properly pleaded, [it does] not [admit] contentions, deductions or conclusions of law or fact.”). Where, as here, the pleader cannot state a cause of action, the demurrer should be sustained without leave to amend so as not to waste the Court’s or the parties’ time and resources. See Blank v. Kirwan (1985) 39 Cal.3d 311, 318. Likewise, a demurrer is properly sustained without leave to amend where the nature of the plaintiff’s claim is clear, but under applicable substantive law it is plain that there can be no liability. Moore v. Morhar (1977) 65 Cal.App.3d 896, 903. The burden of establishing the ability to amend to set forth facts sufficient to constitute a cause of action rests squarely on the plaintiff. Blank, at 318; Award Metals, Inc. v. Superior Court (1991) 228 Cal.App.3d 1128, 1135. IV. THE DEMURRER TO THE FIRST CAUSE OF ACTION IS PROPERLY SUSTAINED AS TO VANGUARD, WITHOUT LEAVE TO AMEND Plaintiff’s first cause of action is for breach of fiduciary duty. “In order to plead a cause of action for breach of fiduciary duty, there must be shown the existence of a fiduciary relationship, its breach, and damage proximately caused by that breach.” Pierce v. Lyman (1991) 1 Cal.App.4th 1093, 1101. “A fiduciary relationship is any relation existing between parties to a transaction wherein one of the parties is in duty bound to act with the utmost good faith for the benefit of the other party. Such a relation ordinarily arises where a confidence is reposed by one person in the integrity of another, and in such a relation the party in whom the confidence is reposed, if he voluntarily accepts or assumes to accept the confidence, can take no advantage from his acts relating to the interest of the other party without the latter's knowledge or consent.” Wolf v. Superior Court (2003) 107 Cal.App.4th 25, 29 (cleaned up). “ [Emphasis added.] ‘[B]efore a person can be charged with a fiduciary obligation, he must either knowingly undertake to act on behalf and for the benefit of another, or must enter into a relationship which imposes that undertaking as a matter of law.’ ” City of Hope Natl. Medical Center v. Genentech, Inc. (2008) 43 Cal.4th 375, 386 (citation omitted). In the case at bar, the FAC is devoid of any allegation that Vanguard “voluntarily accept[ed] or assum[ed]” any relationship whatsoever with Plaintiff, let alone a relationship of trust and 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4880-6391-9105.3 13 DEFENDANT VANGUARD PROPERTIES, INC.’S DEMURRER TO FIRST AMENDED COMPLAINT confidence. Wolf, supra, 107 Cal.App.4th at 29. Likewise, the FAC is devoid of any allegation that Vanguard knowingly undertook to act on behalf and for the benefit of the Plaintiff. City of Hope, supra, 43 Cal.4th at 386. To the contrary, the complaint confirms that Plaintiff and Vanguard were legal strangers to each other at all relevant times, and Vanguard's only connection to the instant action stems from the fact that Gallin and Jones were affiliated with Vanguard at the time they provided TIC consultation services to Plaintiff on behalf of Creative Equity. FAC ¶ 8-13. Similarly, the contract attached to the FAC confirms that Vanguard did not voluntarily accept or assume any relationship with Plaintiff, and did not knowingly undertake to act on behalf and for the benefit of the Plaintiff, as Vanguard was not a party to the contract, Vanguard owed no duties to Plaintiff under the contract and Vanguard did not earn any compensation under the contract. FAC, Ex. A. Furthermore, the gravamen of Plaintiff's breach of fiduciary duty cause of action, as plead, is that "Vanguard breached [its] fiduciary duties to 1367 Natoma by … failing to provide competent services as required under the contract." FAC ¶ 16. However, as Vanguard was not a party to the contract, owed no duties to Plaintiff under the contract and did not earn any compensation under the contract, Vanguard cannot be liable to Plaintiff for breach of fiduciary duty stemming from its failure to "provide competent services as required under the contract". FAC ¶ 16; FAC, Ex. A. While the lack of Vanguard's direct liability is clear, Vanguard also cannot be vicariously liable to Plaintiff for the acts or omissions of Jones and Gallin, as the contract establishes that they were acting on behalf of Creative Equity, not Vanguard. FAC, Ex. A. As Gallin and Jones were not engaged "in business of [their] agency" with Vanguard, Vanguard cannot vicariously liable for same. Daniels v. Select Portfolio Servicing, Inc. (2016) 246 Cal.App.4th 1150, 1171−1172. Additionally, a fiduciary duty cannot be imposed on Vanguard by law (either directly or vicariously), as Vanguard did not enter into a relationship with Plaintiff which could trigger such a duty. City of Hope, supra, 43 Cal.4th at 386. Plaintiff cannot unilaterally create a fiduciary relationship with Vanguard. Further, while Plaintiff alleges that "Vanguard owed fiduciary duties to 1367 Natoma … by providing services in selling or offering for sale TIC Interests in the Property" (see FAC ¶ 15), 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4880-6391-9105.3 14 DEFENDANT VANGUARD PROPERTIES, INC.’S DEMURRER TO FIRST AMENDED COMPLAINT as Vanguard was not a party to the contract, owed no duties to Plaintiff under the contract, did not earn any compensation under the contract, and is not alleged to have sold or marketed any TIC interests on behalf of Plaintiff, Vanguard cannot be liable to Plaintiff for same. FAC ¶ 15-16; FAC, Ex. A. In fact, the contract does not grant Vanguard, or anyone else, the authority to list or sell the Subject Property. FAC, Ex. A. Rather, the contract provides that Creative Equity will supervise and facilitate the conversion of the Subject Property from apartments into TIC interests, and once the TIC interests were created, Plaintiff could "choose to list the TIC Interests or the [Subject] Property with the Creative [Equity] principals, and… allow the Creative [Equity] principals to act as [Plaintiff's] sales agents for a sale each of the TIC Interests or the [Subject] Property" or in the alternative, Plaintiff could chose retain different sales agents ("If the Creative [Equity] principals do not act as [Plaintiff's] sales agents in the sale of any TIC Interest or the [Subject] Property, Plaintiff shall pay to Creative [Equity] 6% of the gross sales price of each such TIC Interest, or 6 % of the gross sales price of the entire Property, at the time it is sold, and such payment shall be required regardless of whether Plaintiff has paid, or is paying, a sales commission to another person or firm. " Emphasis added. FAC, Ex. A, § 3(B). While the lack of Vanguard's direct liability is clear, Vanguard also cannot be vicariously liable to Plaintiff for the acts or omissions of Jones and Gallin, as the contract establishes that they were acting on behalf of Creative Equity, not Vanguard. FAC, Ex. A. As Gallin and Jones were not engaged "in business of [their] agency" with Vanguard, Vanguard cannot vicariously liable for same. Daniels v. Select Portfolio Servicing, Inc. (2016) 246 Cal.App.4th 1150, 1171−1172. Additionally, a fiduciary duty cannot be imposed on Vanguard by law (either directly or vicariously), as Vanguard did not enter into a relationship with Plaintiff which could trigger such a duty. City of Hope, supra, 43 Cal.4th at 386. Plaintiff cannot unilaterally create a fiduciary relationship with Vanguard. Moreover, California law is clear that the contract cannot be construed as a listing agreement for the following reasons: 1. A listing agreement must have a definite term, i.e., a start and end date. As the contract has no start or end date, it is not a listing agreement. Miller & Starr, CA Real Estate 3d Ed. 2011, 5:11, 5-61; FAC, Ex. A. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4880-6391-9105.3 15 DEFENDANT VANGUARD PROPERTIES, INC.’S DEMURRER TO FIRST AMENDED COMPLAINT 2. The fundamental and indispensable requirement of a listing agreement to evidence an intention to employ the broker as an agent or intermediary to locate or negotiate the sale, purchase or lease of the property is absent, as no such intention is expressed with respect to Vanguard. Miller & Starr, CA Real Estate 3d Ed. 2011, 5:11, 5-62 (citing 5:12); FAC, Ex. A. A listing agreement which does not identify the broker is not enforceable, as it does not evidence an intent to employ a specific agent. 2 Miller & Starr, CA Real Estate 3d Ed. 2011, 5:11, 5-61 (citing Barcelon v. Cortese (1969) Cal.App.2d 690, 694-695; Rosenbaum v. Rosenbaum (1967) 257 Cal.App. 2d 193, 199.). As the contract does not identify Vanguard as the broker, and does not authorize Vanguard to do anything, let alone list and sell real property, the contract cannot be construed as a listing agreement. FAC, Ex. A. 3. A listing agreement must specify the amount of compensation to the broker. Miller & Starr, CA Real Estate 3d Ed. 2011, 5:11, 5-62 (citing 5:12.) As the contract fails to identify any compensation to Vanguard, it cannot be construed as a listing agreement. FAC, Ex. A. 4. A listing agreement must identify the price and terms on which a principal is willing to part with the property. Miller & Starr, CA Real Estate 3d Ed. 2011, 5:12, 5-65-66. As the contract fails to identify the price and terms on which Plaintiff was willing to part with the Subject Property as a whole, or the individual TIC interests, it cannot be construed as a listing agreement. FAC, Ex. A. Nor can a fiduciary duty imposed be imposed on Vanguard by law, as Vanguard did not enter into a relationship with Plaintiff which could trigger such a duty. Plaintiff cites to Business & Professions Code section 10100.5(b) at paragraph 15 of the FAC, however the aforementioned code section does not impose a fiduciary duty on Vanguard. Rather, it merely states that a “responsible broker” has a duty to supervise salespersons working under its supervision. Similarly, Plaintiff cites to Business & Professions Code section 10177(h) at paragraph 15 of the FAC, however the aforementioned code section does not impose a fiduciary duty on Vanguard. Rather, it merely restates the broker’s obligation to supervise its salespersons. As the contract confirms that Jones and Gallin, were acting on behalf of Creative Equity at all relevant times, not Vanguard, no duty to supervise existed under Business & Professions Code sections 10100.5(b) or 10177(h) with respect 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4880-6391-9105.3 16 DEFENDANT VANGUARD PROPERTIES, INC.’S DEMURRER TO FIRST AMENDED COMPLAINT to their activities pursuant to said contract. FAC, Ex. A. For the reasons set forth above, the demurrer to this cause of action is properly sustained, without leave to amend, as Plaintiff will be unable to cure this defect by way of amendment, given that Vanguard did not enter into any fiduciary relationship with Plaintiff. Blank, supra, 39 Cal.3d at 318; see also Mercury Casualty Co. v. Superior Court (1986) 179 Cal.App.3d 1027, 1035 (“Permitting plaintiff to amend the complaint would serve no useful purpose given the fact that the actions of petitioner, as set forth in plaintiffs original complaint, cannot give rise to a cause of action”). V. THE DEMURRER TO THE THIRD CAUSE OF ACTION IS PROPERLY SUSTAINED AS TO VANGUARD, WITHOUT LEAVE TO AMEND Plaintiff’s third cause of action is for breach of written contract. Plaintiff alleges that Creative Equity and Vanguard breached its obligations under the contract attached as Exhibit A to the FAC. FAC ¶ 22. A review of the contract confirms that Vanguard is not a party thereto. FAC, Ex. A. Specifically, the contract is between Plaintiff and Creative Equity. Id. Gallin and Jones signed the contract on behalf of Creative Equity. Id. Vanguard is not a party to the contract, owed no duties to Plaintiff under the contract, did not earn any compensation under the contract, is not mentioned in the contract and is not a signatory to the contract. Id. “A cause of action for damages for breach of contract is comprised of the following elements: (1) the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to plaintiff.” Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1367 (cleaned up). “It is, of course, basic hornbook law that the existence of a contract is a necessary element to an action based on contract, regardless whether the plaintiff seeks specific performance or damages for breach of contract.” Harris v. Rudin, Richman & Appel (1999) 74 Cal.App.4th 299, 307. [Emphasis added.] “Mutual consent is necessary to the existence of any contract, and one cannot be made to stand on a contract to which he never consented.” Sackett v. Starr (1949) 95 Cal.App.2d 128, 133 (citation omitted). [Emphasis added.] Here, the FAC is devoid of any contention that Vanguard was a party to the contract, and the contract itself establishes that Vanguard was not a party thereto. FAC, generally; FAC, Ex. A. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4880-6391-9105.3 17 DEFENDANT VANGUARD PROPERTIES, INC.’S DEMURRER TO FIRST AMENDED COMPLAINT As the FAC is devoid of any contention that Vanguard either explicitly or implicitly consented to the contract, and the contract does not identify Vanguard as a party thereto, the claim for breach of contract fails as against Vanguard. See Burnett v. Chimney Sweep (2004) 123 Cal.App.4th 1057, 1069-1071 (holding that property manager was entitled to judgment on the pleadings as to breach of contract cause of action because it was not a party to lease agreement). Nor can Vanguard be considered a third-party beneficiary of the contract, as no intent to benefit Vanguard (or any reference to Vanguard whatsoever) is found within the contract. Id. at 1069-1070. Moreover, a contract must be signed by the person to be charged with the obligations of the agreement and can only be enforced against the person who executed the document. 2 Miller & Starr, CA Real Estate 3d Ed. 2011, 5.10, 5-54 (citing to Civil Code section 1624(a) and 1:78). As Vanguard did not execute the agreement, the contract cannot be enforced against Vanguard. Id. Likewise, the contract cannot be enforced as against Vanguard, as the minimum required terms for an employment agreement between an owner of property and broker are not met herein for the following reasons: a. The parties to the contract must be adequately identified. As Vanguard is not identified in the contract, this element is not met. b. The contract must result from an offer and acceptance that manifests a mutual intent to be bound by the contract terms. As Vanguard is not party to the contract, Vanguard did not accept the contract and Vanguard did not manifest an intent to be bound by the contract, this element is not met. c. The contract must provide for consideration to each of the parties. As no consideration is afforded to Vanguard under the contract, this element is not met. d. The contract must contain a property description that is sufficiently accurate. As the property description fails to identify the individual TIC interests (as said interests were not yet created), this element is not met. e. The contract must evidence that the owner has employed the broker. As there is no evidence in the contract that Plaintiff has employed Vanguard, and as there is no reference to Vanguard, this element is not met. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4880-6391-9105.3 18 DEFENDANT VANGUARD PROPERTIES, INC.’S DEMURRER TO FIRST AMENDED COMPLAINT f. The contract must contain the signature of the principals. As no one on behalf of Vanguard signed the contract, this element is not met. See 2 Miller & Starr, CA Real Estate 3d Ed. 2011, 5:37, 5-145 (citing to CC 1624(a) and 1:78). Accordingly, the demurrer to this cause of action is properly sustained, without leave to amend, as Plaintiff will be unable to cure this defect by way of amendment. Blank, supra, 39 Cal.3d at 318; see also Mercury Casualty Co., supra, 179 Cal.App.3d at 1035 (“Permitting plaintiff to amend the complaint would serve no useful purpose given the fact that the actions of petitioner, as set forth in plaintiffs original complaint, cannot give rise to a cause of action”). VI. THE DEMURRER TO THE FOURTH CAUSE OF ACTION IS PROPERLY SUSTAINED AS TO VANGUARD, WITHOUT LEAVE TO AMEND Plaintiff’s fourth cause of action is for fraud. In support of this cause of action, Plaintiff alleges that Gallin and Jones “as well as Vanguard and GJ Creative, by and through Gallin and Jones” made representations to Plaintiff “that the project would be completed within a time frame that Defendants knew it could not be completed within, and that the work was of a quality that it in fact was not.” FAC ¶ 25. / / / “To establish a claim for fraudulent misrepresentation, the plaintiff must prove: (1) the defendant represented to the plaintiff that an important fact was true; (2) that representation was false; (3) the defendant knew that the representation was false when the defendant made it, or the defendant made the representation recklessly and without regard for its truth; (4) the defendant intended that the plaintiff rely on the representation; (5) the plaintiff reasonably relied on the representation; (6) the plaintiff was harmed; and, (7) the plaintiff’s reliance on the defendant’s representation was a substantial factor in causing that harm to the plaintiff. Each element in a cause of action for fraud must be factually and specifically alleged. Additionally, when pleading fraud against a corporation, a plaintiff must allege the names of the persons who made the misrepresentations, their authority to speak for the corporation, to whom they spoke, what they said or wrote, and when it was said or written.” Perlas v. GMAC Mortgage, LLC (2010) 187 Cal.App.4th 429, 434 (cleaned up). [Emphasis added.] 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4880-6391-9105.3 19 DEFENDANT VANGUARD PROPERTIES, INC.’S DEMURRER TO FIRST AMENDED COMPLAINT “[F]raud must be specifically pleaded. This means: (1) general pleading of the legal conclusion of fraud is insufficient; and (2) every element of the cause of action for fraud must be alleged in full, factually and specifically, and the policy of liberal construction of pleading will not usually be invoked to sustain a pleading that is defective in any material respect. It is bad for courts to allow and lawyers to use vague but artful pleading of fraud simply to get a foot in the courtroom door.” Wilhelm v. Pray, Price, Williams & Russell (1986) 186 Cal.App.3d 1324, 1331 (cleaned up). Here, the FAC is devoid of the allegations required in order to successfully plead fraud as against Vanguard, a corporate defendant; namely, that Gallin and Jones had any authority whatsoever to speak on behalf of Vanguard. The FAC does not, for example, allege that either Gallin or Jones were managers or officers of Vanguard; indeed, it alleges the opposite: that they were acting on behalf of Creative Equity at all relevant times, not Vanguard. FAC, Ex. A; see also FAC ¶ 8 (Plaintiff alleges that, on or about April 18, 2018, it entered into a written contract with Creative Equity; that the contract was drafted by Creative Equity and signed by Gallin and Jones on behalf of Creative Equity.) The fact that the members of Creative Equity, i.e., Gallin and Jones, were affiliated with Vanguard at the time they provided TIC consultation services to Plaintiff on behalf of Creative Equity is insufficient to hold Vanguard liable for any alleged representations made by Gallin and Jones. See Hobart v. Hobart Estate Co. (1945) 26 Cal.2d 412, 449-452 (holding that there was no evidence that the defendant had authority to bind the defendant corporation to alleged misrepresentations). Furthermore, the misrepresentations alleged by and through the FAC are in fact non- actionable statements of opinion, as they pertain to future events and the quality of work. California law is clear that "an opinion is not considered a representation of fact. An opinion is a person’s … statement regarding a future event, or a judgment about quality, value, authenticity, or similar matters." 1 CACI 1904 (2021); see also Graham v. Bank of America, N.A. (2014) 226 Cal.App.4th 594, 606−607. As Plaintiffs fraud cause of action is predicated on the alleged representation by Gallin and Jones that the Subject Property "would be completed within a time frame [in the future]", and that the "work was of a quality that it … was not", the statements amounts to non-actionable 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4880-6391-9105.3 20 DEFENDANT VANGUARD PROPERTIES, INC.’S DEMURRER TO FIRST AMENDED COMPLAINT statements of opinion and the cause of action fails. Id.; see also FAC ¶ 25-26. Additionally, as the contract confirms that Creative Equity will use the services of attorneys, accountants, contractors, and other professionals to perform the services required under the contract (see FAC Ex. A, § 2); that Plaintiff shall retain final decision-making authority on all aspects of the ownership, development and sale of the TIC interests and the Subject Property (see FAC Ex. A, § 2); and that Creative Equity is not ultimately responsible for the work done by the third parties or services providers it recommends (see FAC Ex. A, § 5); Plaintiff cannot establish the exceptions to the general rule that statements of opinion are not actionable. Brakke v. Economic Concepts, Inc. (2013) 213 Cal.App.4th 761, 769. Accordingly, the demurrer to this cause of action is properly sustained, without leave to amend, as Plaintiff will be unable to cure this defect by way of amendment. Blank, supra, 39 Cal.3d at 318; see also Mercury Casualty Co., supra, 179 Cal.App.3d at 1035 (“Permitting plaintiff to amend the complaint would serve no useful purpose given the fact that the actions of petitioner, as set forth in plaintiffs original complaint, cannot give rise to a cause of action”). VII. CONCLUSION For the foregoing reasons, Vanguard respectfully requests that the Court sustain its Demurrer to Plaintiff’s FAC in its entirety, without leave to amend. DATED: October 28, 2021 MANNING & KASS ELLROD, RAMIREZ, TRESTER LLP By: Jennifer Supman Attorneys for Defendant, VANGUARD PROPERTIES, INC., a California corporation