Flaum v. ASN Calabasas

Filed 6/26/08 Flaum v. ASN Calabasas CA2/2

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION TWO

APPEAL from orders of the Superior Court of Los Angeles County. Wendell R. Mortimer, Jr., Judge. Affirmed in part and reversed in part.

Snyder ♦ Dorenfeld, David K. Dorenfeld and Rodger S. Greiner for Plaintiffs and Appellants.

Gordon & Reese, Miles D. Scully, Jason F. Meyer, and Charles V. Berwanger for Defendants and Respondents ASN Calabasas I LLC, ASN Calabasas II LLC, and Archstone Property Management (California) Inc.

Manly & Stewart, John C. Manly and Morgan A. Stewart for Defendants and Respondents Legacy Malibu Meadows II, L.P., Legacy Malibu Meadows, L.P., Legacy Partners Residential, L.P., and Legacy Partners Residential, Inc.

Plaintiffs and appellants Mona Flaum and Kerry Fairly (collectively appellants) appeal the dismissal of their class action against defendants and respondents ASN Calabasas I LLC, ASN Calabasas II LLC, Archstone, Archstone Property Management (California) Incorporated, and Archstone-Smith Operating Trust; Legacy Malibu Meadows II, L.P., Legacy Malibu Meadows, L.P., Legacy Partners Residential, L.P., and Legacy Partners Residential, Inc. (collectively respondents) for damages allegedly incurred as the result of water intrusion and mold in a residential apartment complex at which appellants resided. Appellants contend the trial court erred by sustaining demurrers, without leave to amend, to their causes of action for breach of contract and violation of Business and Professions Code section 17200.[1] Appellants further contend the trial court abused its discretion by striking their class action allegations. We affirm the orders sustaining the demurrers to the breach of contract cause of action and striking the class allegations. We reverse the orders sustaining the demurrers to the section 17200 cause of action and dismissing appellants action.

BACKGROUND

Appellants are a current and former tenant of a 600-unit, multi-building apartment complex located in Calabasas, California (the property). Respondents are the current and former owners or managers of the property.

1. The Complaint and First Amended Complaint

On June 24, 2005, appellants filed a class action complaint against respondents asserting six causes of action, for breach of contract, breach of implied warranty, negligent violation of statutory and legal duties, intentional violation of statutory and legal duties, fraud, and violation of section 17200. Respondents demurred and moved to strike portions of the complaint.

In response to the demurrer, appellants filed a first amended complaint on February 6, 2006, alleging the same causes of action as the original complaint. Appellants attached to their amended complaint exemplar copies of written lease agreements entered into by Mindy Dadon and Michelle Rede.[2] Appellants alleged that [t]hese exemplars set forth the terms and conditions of the contractual relationship between the parties, that [t]hese lease agreements are standardized, and that each Plaintiff possesses similar lease agreements. Respondents demurred and moved to strike portions of the amended complaint.

On January 12, 2006, appellants served comprehensive class discovery on respondents seeking production of information and documents pertaining to each of the 600 apartment units that comprised the property. On February 27, 2006, respondents filed an ex parte application for an order staying class discovery until 45 days after the trial court ruled on their motion to strike the class allegations. The trial court granted the ex parte application and entered an order staying all discovery pending the courts ruling on the motion to strike.

On May 16, 2006, the trial court ruled on the demurrers and motions to strike the first amended complaint, sustaining the demurrers with leave to amend and denying the motions to strike without prejudice. The minute order for that date reflects the trial courts rulings on each cause of action, as follows: Demurrers to first 2 causes of action (breach of contract and breach of implied warranty[)]: . . . they need to attach lease agreements (not exemplars) or plead the essential terms. Demurrers to the 3d and 4th causes of action (violation of statutory duties) . . . [i]t is unclear which statute provisions are involved and how and what legal duties are alleged to have been violated. Demurrer to 5th cause of action (fraud) . . . [i]t is not pled with particularity as to each defendant and/or each plaintiff. [] Demurrer to 6th cause of action (B & P 17200) . . . [i]t is vague and unclear as to what and how and when each defendant knew of the mold in each building. The attached 2004 report only appears to note mold in 16 out of the 600 units.

2. Second Amended Complaint

On June 12, 2006, appellants filed a second amended complaint alleging causes of action for breach of contract, fraud, and violation of section 17200. Respondents again demurred and filed motions to strike. In response to the demurrers, appellants withdrew their fraud cause of action.

On September 22, 2006, the trial court ruled on the demurrers, stating that appellants have done little to address the concerns that this Court had when ruling on the previous demurrer. The specific facts necessary to plead fraud or a 17200 cause of action are still lacking. The trial court then sustained, without leave to amend, the demurrers to the section 17200 cause of action, and sustained the demurrers to the breach of contract cause of action with leave to amend to plead the essential terms of their lease agreement required for a breach of contract cause of action. The trial court then granted the motion to strike the class allegations, noting that [t]he existence, extent and cause of mold in each unit and conduct following discovery presents individualized issues of liability, causation and damages. The claims for a rental rebate turns on facts unique to each member.

3. Third Amended Complaint

A third amended complaint was filed on October 12, 2006, asserting a single cause of action for breach of contract. On November 9, 2006, appellants filed a notice of errata correcting certain errors in the third amended complaint. Respondents again demurred. On December 19, 2006, the trial court sustained the demurrers without leave to amend, stating, [d]espite two previous court orders, plaintiff[s] . . . still have not attached the lease or alleged the essential terms thereof. The action was dismissed on March 22, 2007. This appeal followed.

DISCUSSION

I. Standard of Review

On appeal from a judgment dismissing an action after sustaining a demurrer without leave to amend, the standard of review is well settled. The reviewing court gives the complaint a reasonable interpretation, and treats the demurrer as admitting all material facts properly pleaded. [Citations.] The court does not, however, assume the truth of contentions, deductions or conclusions of law. [Citation.] The judgment must be affirmed if any one of the several grounds of demurrer is well taken. [Citations.] [Citation.] However, it is error for a trial court to sustain a demurrer when the plaintiff has stated a cause of action under any possible legal theory. [Citation.] (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967.) The legal sufficiency of the complaint is reviewed de novo. (Montclair Parkowners Assn v. City of Montclair (1999) 76 Cal.App.4th 784, 790.) A trial courts order sustaining a demurrer without leave to amend is reviewed for abuse of discretion. (Schifando v. City of Los Angeles(2003) 31 Cal.4th 1074, 1081.)

The trial courts ruling striking appellants class allegations is also reviewed for abuse of discretion. (Osborne v. Subaru of Am. (1988) 198 Cal.App.3d 646, 654.) [T]rial courts have been given great discretion with regard to class certification. [Citation.] . . . [I]n the absence of other error, [an appellate] court will not disturb a trial court ruling on class certification which is supported by substantial evidence unless (1) improper criteria were used [citation]; or (2) erroneous legal assumptions were made [citation]. (Richmond v. Dart Industries, Inc. (1981) 29 Cal.3d 462, 470.)

II. Demurrer

A. Breach of Contract

To state a cause of action for breach of contract, a party must plead the existence of a contract, his or her performance of the contract or excuse for nonperformance, the defendants breach and resulting damage. (Otworth v. Southern Pac. Transportation Co. (1985) 166 Cal.App.3d 452, 459.) If the action is based on alleged breach of a written contract, the terms must be set out verbatim in the body of the complaint or a copy of the written agreement must be attached and incorporated by reference. (Ibid.) (Harris v. Rudin, Richman & Appel (1999) 74 Cal.App.4th 299, 307.)

The allegations of the third amended complaint fail to meet the requirements for pleading the existence and terms of a written contract. Paragraph 14 of the third amended complaint states: Attached herein as Exhibit #1 are copies of lease agreements of Plaintiffs MINDY DADON, KERRY FAIRLY, MINDY DADON [sic] and MICHELLE REDE. The leases attached to the third amended complaint, however, were entered into by Ms. Dadon and Ms. Rede only.[3] There is no lease purportedly entered into by appellants.

Appellants argue that the notice of errata filed on November 9, 2006, sets forth the necessary allegations to state a breach of contract cause of action. Paragraph 26 of the third amended complaint, as modified by the notice of errata, states: The Plaintiffs, and each of them, entered into written lease agreements with the Defendants, and each of them. Attached hereto as Exhibit 1 and incorporated by this reference [are] exemplar copies of the written lease agreements between Plaintiffs MINDY DADON dated March 1, 2004 (Exhibit 1)[,] Plaintiff MICHELLE REDE dated December 26, 2006 (Exhibit 2), the cover page to Plaintiff KERRY FAIRLYs lease dated December 29, 2000 (Exhibit 3), as to Defendants. The lease agreements between all Plaintiffs and Defendants are standardized and not unique and therefore each Plaintiff possesses similar lease agreements. These exemplars set forth the terms and conditions of the contractual relationship between the parties. As a result of the landlord tenant relationship created by the aforementioned lease agreements Defendants assumed duties and obligations pursuant to the California Civil Code 1940 et seq.

These allegations fail to establish the existence of an agreement between appellants, on the one hand, and respondents on the other. The only tenant signatories to the leases attached to the third amended complaint are Ms. Dadon and Ms. Rede. There is no allegation that the relevant provisions of the leases entered into by appellants are the same as those entered into by the other plaintiffs. Allegations that the exemplar leases are standardized and not unique and that appellants possess similar agreements are insufficient to set forth the terms of their respective lease agreements. Appellants failed to attach copies of their respective leases or set forth the relevant terms in the third amended complaint, despite being specifically ordered to do so by the trial court on two prior occasions. The third amended complaint fails to state facts sufficient to constitute a cause of action by appellants for breach of written contract.

Appellants contend that the trial court abused its discretion by denying them leave to amend their pleading for a fourth time to attempt to state a breach of contract cause of action. They argue that respondents presumably had possession of the requisite leases and that appellants should have been afforded the opportunity to conduct discovery to request production of those leases. The discovery stay imposed by the trial court in February 2006 was precipitated by appellants broad class action discovery requests seeking the production of documents concerning all 600 units at the property. Appellants had ample opportunity to seek to modify the discovery order to allow them more limited discovery relevant to their breach of contract cause of action. They did not do so, even after the trial court admonished them, on two separate occasions, to attach copies of their respective leases or set forth the relevant terms in the body of their complaint. The trial court did not abuse its discretion by sustaining the demurrer, without leave to amend, as to the breach of contract cause of action.

B. Violation of Business and Professions Code Section 17200

Section 17200 proscribes three types of unfair competition -- acts or practices which are unlawful, unfair, or fraudulent.[4] Actions to enjoin an unfair business practice or for restitution of money or property acquired by an unfair business practice may be brought by any person who has suffered injury in fact and has lost money or property as a result of the unfair competition. ( 17203, 17204.)

The term fraudulent as used in section 17200 does not refer to the common law tort of fraud. (Saunders v. Superior Court (1994) 27 Cal.App.4th 832, 839.) Unlike common law fraud, a [section 17200] violation can be shown even without allegations of actual deception, reasonable reliance and damage. [Citation.] (Berryman v. Merit Property Management, Inc. (2007) 152 Cal.App.4th 1544, 1556 (Berryman); see also Quelimane Co. v. Stewart Title Guar. Co. (1998) 19 Cal.4th 26, 46-47 [fact-specific pleading requirements for common law fraud not applicable to section 17200 claims].) To state a cause of action under section 17200, it is only necessary to show that members of the public are likely to be deceived. (Committee on Childrens TV v. General Foods Corp. (1983) 35 Cal.3d 197, 211 (Childrens TV); Aron v. U-Haul Co. of California (2006) 143 Cal.App.4th 796, 806 (Aron); Schnall v. Hertz Corp. (2000) 78 Cal.App.4th 1144, 1167.) A reasonable consumer standard applies when determining whether members of the public are likely to be deceived. (Aron, supra, 143 Cal.App.4th at p. 806.) Under this standard, unless a particular disadvantaged or vulnerable group is targeted, the deceptive business practice is judged by the effect it would have on a reasonable consumer. (Lavie v. Procter & Gamble Co. (2003) 105 Cal.App.4th 496, 506-507.)

When an unfair competition claim is based on an alleged fraudulent business practice . . . a plaintiff need not plead the exact language of every deceptive statement; it is sufficient for [the] plaintiff to describe a scheme to mislead customers, and allege that each misrepresentation to each customer conforms to that scheme. ([Childrens TV,supra,] 35 Cal.3d [at pp.] 212-213.) The allegation may be based on representations to the public which are untrue, and also those which may be accurate on some level, but will nonetheless tend to mislead or deceive. . . . A perfectly true statement couched in such a manner that it is likely to mislead or deceive the consumer, such as by failure to disclose other relevant information, is actionable under [section 17200]. (McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1471.) . . . Whether a practice is deceptive, fraudulent, or unfair is generally a question of fact which requires consideration and weighing of evidence from both sides and which usually cannot be made on demurrer. [Citations.] (Linear Technology Corp. v. Applied Materials, Inc. (2007) 152 Cal.App.4th 115, 134-135.)

Appellants contend the second amended complaint states a cause of action for violation of section 17200 and that the trial court erred by sustaining the demurrer as to that claim. Appellants section 17200 cause of action incorporates allegations previously set forth in the second amended complaint. Paragraph 38 of the second amended complaint alleges that respondents sought to mislead appellants by withholding material information about the condition of the property to induce them to enter into lease agreements: At all times relevant hereto, [respondents], and each of them, knew that the PROPERTY was infested with mold and shielded, refused and omitted any such disclosures to the [appellants], and each of them, specifically designed to entice and secure reliance upon the [appellants] in moving into the buildings.

Paragraph 39 alleges a duty by respondents to disclose the withheld information: By virtue of the [respondents] superior knowledge of material facts regarding the PROPERTY which they knew were neither known by nor readily accessible to [appellants] and the general public, and by virtue of the duties undertaken by [respondents] to provide habitable and safe residential units in exchange for rental payments made by [appellants], [respondents] owed the [appellants] and the general public the duty to disclose all relevant facts relating to the existence of construction defects and presence of toxic mold at the PROPERTY to [appellants] and the general public so that [appellants] decision to enter into a lease agreement with [respondents] was done so with the appropriate knowledge as to the PROPERTYS true condition. Paragraph 48 alleges that respondents nondisclosure of material information regarding the property constituted an unfair business practice under section 17200, and paragraph 49 alleges that appellants suffered injury in fact as the result of respondents nondisclosure, by paying rent in excess of the fair market value of the property. As permitted under the statute, appellants seek injunctive and restitutionary relief against respondents. Appellants allegations are sufficient to state a cause of action for a fraudulent business practice under section 17200. (Childrens TV, supra, 35 Cal.3d at pp. 212-213.)

Respondents argue that the second amended complaint fails to state with particularity the specific facts supporting the allegation that respondents engaged in a fraudulent business practice.[5] Such specificity in pleading is not required, however, to state a cause of action for a fraudulent business practice under section 17200. (Childrens TV, supra, 35 Cal.3d at p. 211; Berryman, supra, 152 Cal.App.4th at p. 1556; Aron, supra, 143 Cal.App.4th at p. 806.) The second amended complaint alleges that respondents knew at all relevant times of the existence of mold in the property; that they had a duty to disclose this information to appellants and prospective tenants; and that respondents withheld such information in order to induce appellants and others to enter into lease agreements and to pay rent above the fair market value for the property. Although the second amended complaint does not expressly state that respondents nondisclosures were part of an overall scheme to mislead consumers, and that each nondisclosure to each tenant and prospective tenant conformed to that scheme (Childrens TV, supra, 35 Cal.3d at pp. 212-213), the allegations therein describe such a scheme and are sufficient to show that a reasonable consumer was likely to be deceived by respondents nondisclosures.

The trial court erred by sustaining the demurrers to appellants cause of action for violation of section 17200.

III. Class Allegations

Appellants contend the trial court abused its discretion by striking the class action allegations in the second amended complaint. When the issue resolved on demurrer is whether an action should proceed as a class action, the trial court must determine whether there is a reasonable possibility plaintiffs can plead a prima facie community of interest among class members. (Brown v. Regents of Univ. of Cal. (1984) 151 Cal.App.3d 982, 988.) The ultimate question in every case of this type is whether, given an ascertainable class, the issues which may be jointly tried, when compared with those requiring separate adjudication, are so numerous or substantial that the maintenance of a class action would be advantageous to the judicial process and to the litigants. [Citations.] If the ability of each member of the class to recover clearly depends on a separate set of facts applicable only to him, then all of the policy considerations which justify class actions equally compel the dismissal of such inappropriate actions at the pleading stage. (Id. at p. 989.)

Maintenance of a class action requires the existence of an ascertainable class and a well-defined community of interest among the class members. [Citation.] The community of interest requirement embodies three factors: (1) predominant common questions of law or fact; (2) class representatives with claims or defenses typical of the class; and (3) class representatives who can adequately represent the class. [Citation.] (Silva v. Block (1996) 49 Cal.App.4th 345, 350-351, quoting Richmond v. Dart Industries, Inc., supra, 29 Cal.3d at p. 470.)

In their second amended complaint, appellants purport to represent persons who rented or resided in any of the 600 units at the property between July 1, 2001, and the date the initial complaint was filed. They allege that common questions of law and fact exist as to all class members, including [w]hether [respondents] adequately disclosed to existing and/or prospective tenants, the existence of construction defects at the apartment complex, including, but not limited to, severe water intrusion, which resulted in the existence of mold, which was pervasive throughout the development; and [w]hether [respondents] intentionally withheld information regarding the existence of toxic mold, which was pervasive throughout the development.

The trial court struck the class allegations on the ground that appellants failed to demonstrate that common questions of law or fact predominated: The existence, extent and cause of mold in each unit and conduct following discovery presents individualized issues of liability, causation, and damages. We agree with the trial court that issues requiring separate adjudication predominate over common ones. Appellants own allegations reveal the absence of such commonality. In paragraph 23 of the second amended complaint, it was alleged that a survey of 58 of the 600 units undertaken at the property in June 2000 revealed mold defects in only 16 of those units. It is thus evident from the face of the second amended complaint that not all of the purported class members resided in units where mold was present. For units in which mold was present, appellants would have to present fact-specific evidence concerning the location, quantity, and type of mold, and whether the presence of mold was caused by water intrusion resulting from construction defects. It is also evident from the face of the second amended complaint that not all of the purported class members experienced water intrusion to the same extent and in the same areas. An inspection report attached as an exhibit and incorporated by reference in the second amended complaint describes water intrusion damage in the 58 units inspected as stains on the walls of some units, stains on the ceilings of other units, and stains on the wallboard along the perimeter of the windows and doors of other units.

Appellants argue that the trial courts striking of the class allegations without giving them the opportunity to conduct discovery was an abuse of discretion. [W]here the invalidity of the class allegations is revealed on the face of the complaint, and/or by matters subject to judicial notice, the class issue may be properly disposed of by demurrer or motion to strike. [Citations.] In such circumstances, there is no need to incur the expense of an evidentiary hearing or class-related discovery. (Canon U.S.A. v. Superior Court (1998) 68 Cal.App.4th 1, 5.) The trial court did not abuse its discretion by striking the class allegations in this case.

DISPOSITION

We affirm the orders sustaining the demurrers to the cause of action for breach of contract and striking the class allegations in the second amended complaint. We reverse the order sustaining the demurrers to the cause of action for violation of section 17200. The parties will bear their respective costs on appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.

_______________________, J.

CHAVEZ

We concur:

__________________________, P. J.

DOI TODD

__________________________, J.

ASHMANN-GERST

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[1] All further statutory references are to the Business and Professions Code.

[2] Ms. Dadon and Ms. Rede were also plaintiffs in this action but are not parties to this appeal.

[3] As discussed, neither Ms. Rede nor Ms. Dadon are parties to this appeal.

[4] Section 17200 states: As used in this chapter, unfair competition shall mean and include any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by Chapter 1 (commencing with Section 17500) of Part 3 of Division 7 of the Business and Professions Code.

[5] The trial court agreed, stating in its ruling sustaining the demurrer to the section 17200 cause of action in the first amended complaint that [i]t is vague and unclear as to what and how and when each [respondent] knew of the mold in each building. In sustaining the demurrer to the section 17200 cause of action in the second amended complaint, the trial court stated: The specific facts necessary to plead fraud or a 17200 cause of action are still lacking.