ALLISON CLAIRE, Magistrate Judge.
On August 28, 2013, the court held a hearing on defendants' June 13, 2013 motion to dismiss the first amended complaint. Plaintiff appeared in pro per. Douglas Roeca appeared for defendants Brian and Dianne Fitzpatrick. On review of the motion, the briefs filed in support and opposition, and good cause appearing therefor, THE COURT FINDS AS FOLLOWS:
Though the first amended complaint is long and detailed, the essence of plaintiff's claim in this family dispute is that he invested and/or loaned money towards the purchase of land in El Dorado County and the construction of a winery and lodge (the Fitzpatrick Winery and Lodge) that his brother, defendant Brian Fitzpatrick, managed. Eventually the land was transferred to Brian, though plaintiff was repeatedly assured over the years by Brian that plaintiff's investments and/or loans would be repaid.
Plaintiff alleges that, beginning in 1974, he invested and loaned money in "a series of investments" that resulted in his purchase of land for the Fitzpatrick Winery and Lodge in El Dorado County, California. First Am. Compl. ("FAC") 3-4, Ex. A. Plaintiff was also the applicant and then licensed and bonded party for the winery, though Brian eventually came to hold the license in 1986. FAC 4, 20.
Plaintiff's investments are detailed as follows:
FAC 15.
Plaintiff and Brian worked together closely on the Fitzpatrick Winery and Lodge. Brian acted as plaintiff's agent in the initial purchase of land in El Dorado County. FAC 3, 20, Ex. A. Brian also operated as an officer/agent of California Connection Corporation, Inc., a legal entity established and owned by plaintiff for the purpose of advancing the Fitzpatrick Winery and Lodge.
Plaintiff invested in the winery venture because he believed that he would eventually be repaid. FAC 15. Since this was a family relationship, "the accounting was weak," though plaintiff "was repeatedly assured by Defendants and other family members that `in the end' a proper accounting would be made."
In late 2011, plaintiff became aware through his mother that Brian and his wife, defendant Dianne Fitzpatrick,
In 1974, plaintiff purchased a rental property in Santa Barbara, California. Opp'n 5. He offered Brian a partnership in the property if he would manage it; Brian apparently agreed to this proposal. Opp'n 5. In 1978, at the insistence of plaintiff's father, the property was sold in furtherance of Brian's dream of moving to the country. Opp'n 5-6. A large portion of the sale was then used to purchase the property in El Dorado County, which plaintiff now contends was purchased by Brian.
In 1978, Brian suggested to plaintiff that they form a partnership to operate a vineyard and winery. Opp'n 6. Plaintiff agreed and obtained a Bond/License from the Bureau of Alcohol, Tobacco and Firearms since Brian was ineligible.
In 1980, plaintiff notified defendant and a third partner that he was unhappy with the accounting and the proposed profit distribution, and agreed to invest further sums only as a preference investment with interest accruing at a rate of 12% per annum. Opp'n 6. Plaintiff contends that Brian accepted substantial sums from plaintiff following this agreement.
In 1981, Brian located another site for the winery in Fairplay, California. Opp'n at 7. Plaintiff purchased these forty acres in order to move the winery to a "superior site" and later deeded a portion to Brian "in order to enable a future split of the property."
Between 1984 and 1986, plaintiff invested approximately $150,000 to build a lodge on the property. Opp'n 7. Brian contributed labor and plaintiff paid him accordingly.
After plaintiff got married in 1986, discussion was had regarding the sale of plaintiff's interest to the defendants. Opp'n 9. It appears that this land was deeded to defendants in 1987, but no accounting was made because Brian's "normal reaction . . . verg[ed] on, and sometimes achiev[ed], physical violence."
Around December 2011, defendants sold the Fitzpatrick Winery and Lodge to Gold Mountain Winery. Opp'n 4. Brian contacted plaintiff in January 2012 to inform him of the sale, but has since refused to enter mediation or arbitration to establish an equitable apportionment of the proceeds.
On December 5, 2012, plaintiff initiated suit against defendants Brian and Dianne Fitzpatrick and Gold Mountain Winery. Plaintiff generally alleged "a violation of a long-standing relationship based on trust and cooperation" by Brian and Dianne. Compl. 2. He alleged: (1) breach of an implied contract; (2) breach of the implied covenant of good faith and fair dealing; (3) breach of fiduciary duty; (4) fraud; (5) theft by deception; (6) constructive trust; (7) unjust enrichment; and (8) that Gold Mountain Winery conspired with defendants to defraud him. Compl. 3-4, 7-9, 11, 23-24.
On February 27, 2013, Brian and Dianne Fitzpatrick moved to dismiss for failure to state a claim, or, alternatively, for a more definite statement. Gold Mountain Winery filed a joinder on March 6, 2013. On March 15, 2013, despite joining the previous motion, Gold Mountain Winery filed a separate motion to dismiss for failure to state a claim.
On May 7, 2013, the undersigned granted the joint motion to dismiss and Gold Mountain Winery's separate motion because the complaint lacked specificity. ECF No. 23. Plaintiff was granted thirty days to file an amended complaint.
Plaintiff filed an amended complaint on May 28, 2013, and a modified first amended complaint on June 4, 2013.
On June 5, 2013, Gold Mountain Winery filed a motion to dismiss for failure to state a claim. Subsequently, on request of the plaintiff, the court dismissed Gold Mountain Winery with prejudice and accordingly denied its motion as moot.
On June 13, 2013, Brian and Dianne Fitzpatrick also filed a motion to dismiss for failure to state a claim, or, alternatively, for a more definite statement. Plaintiff opposes this motion.
Plaintiff has also filed a motion for leave to file a supplemental pleading. ECF No. 41.
The purpose of a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) is to test the legal sufficiency of the complaint.
Brian and Dianne Fitzpatrick move to dismiss for plaintiff's failure to state a claim on which relief can be granted. Alternatively, they ask for a more definite statement. Defendants argue that plaintiff has not properly cured the vagueness of his last complaint. While plaintiff counters that his complaint is sufficient, he also asserts additional facts in his opposition.
The court construes plaintiff's fraud claim as one of fraudulent deceit because plaintiff accuses the defendants of making promises that they never intended to perform, specifically promises to repay plaintiff for his investments and/or loans.
Under California Civil Code section 1709, one is liable for fraudulent deceit if he "deceives another with intent to induce him to alter his position to his injury or risk...." Cal. Civ. Code, § 1709. Section 1710 of the Civil Code defines deceit for the purposes of Civil Code section 1709 as, inter alia, "[a] promise, made without any intention of performing it." Cal. Civ. Code § 1710. "`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.' [Citation.]"
Federal Rule of Civil Procedure 9(b) requires a plaintiff to plead with particularity, a requirement which "applies to state-law causes of action."
Defendants argue that plaintiff fails to meet Rule 9's particularity requirement because plaintiff has not adequately pled "the who, what, when, where and how" of his fraud claim. Specifically, they assert that plaintiff failed to (1) specify who made the statements; (2) specify when the statement were made (except "over the years."); (3) specify what was said (except promises to comply with accounting and business standards); (4) specify what the underlying promises were; and (5) explain why there was such a gap between the last investment in 1986 and the filing of the complaint in 2012. They also assert that plaintiff has not adequately pled that defendants intended not to perform their promise.
Turning to the first element of a fraud claim, misrepresentation, "[a] promise to do something necessarily implies the intention to perform; hence, where a promise is made without such intention, there is an implied misrepresentation of fact that may be actionable fraud."
To sufficiently plead the first requirement, that the defendant made a promise, the complaint must state "facts which `show how, when, where, to whom, and by what means the representations were tendered.'"
Plaintiff alleges here that "numerous promises" were made "over the years" by defendants that they would treat his "investments and loans . . . in accordance with applicable standards of accounting and business ethics." Plaintiff also alleges that the promises were "a misrepresentation of the actual intent of the Defendants." While the court finds that plaintiff has adequately pled that defendants did not intend to perform their promise, plaintiff has again failed to specifically allege "facts which [would] `show how, when, where, to whom, and by what means the representations were tendered.'"
Plaintiff next asserts that defendants violated their fiduciary duty to him. In the alternative, plaintiff alleges the existence of a confidential relationship. Defendants seek dismissal of this claim.
As the California Supreme Court has stated, "`[a] confidential relation may exist although there is no fiduciary relation....'"
Breach of fiduciary duty is established with: (1) the existence of a fiduciary duty; (2) a breach of the fiduciary duty; and (3) resulting damage.
One charged with a fiduciary duty "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."
Plaintiff argues first that he and defendants were business partners and, therefore, defendants owed him a fiduciary duty.
Plaintiff next argues the existence of an agency relationship based on the fact that Brian acted as plaintiff's agent in the purchase of land in 1981. "An agent is a fiduciary with respect to matters within the scope of his agency." Rest. 2d Agency, § 13. Therefore, the agent is required "to act primarily for the benefit of another in matters connected with his undertaking" and has "the duty [to his principal] to account for profits arising out of the employment, the duty not to act as, or on account of, an adverse party without the principal's consent, the duty not to compete with the principal on his own account or for another in matters relating to the subject matter of the agency, and the duty to deal fairly with the principal in all transactions between them." Rest. 2d Agency, § 13, com. a, 58;
The analysis of plaintiff's claim is made difficult by plaintiff's vague and conclusory allegations. For example, precisely how did the defendants breach their fiduciary duty to plaintiff? Was it through the sale of the winery without first consulting with plaintiff? Is it through their continued refusal to compensate plaintiff for his investments and/or loans? For these reasons, plaintiff's claim of breach of fiduciary duty as to Brian fails. Moreover, because there are no specific allegations as to Dianne Fitzpatrick, this claim will be dismissed as to her, as well. Plaintiff will, however, be granted leave to amend this claim.
Breach of a confidential relationship is established when: (1) one party is vulnerable to the other; (2) this vulnerability results in the empowerment of the stronger party; (3) empowerment has been solicited or accepted by the stronger party; and (4) prevents the weaker party from effectively protecting itself.
Plaintiff also asserts a claim for breach of an implied contract and states that "there is ample evidence which supports the intention of the parties to create a binding contract." FAC 22-23. Defendants contend that plaintiff has not established a contract because he "has failed to allege even the essential elements of a contract." MTD 5.
The elements of a cause of action for breach of contract are (1) the existence of the contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendant's breach, and (4) the resulting damages to the plaintiff.
Plaintiff here has sufficiently alleged that the parties entered into an implied contract: he claims that "numerous promises [were] made over the years by Defendants Brian and Dianne Fitzpatrick that all of his investments and loans would be treated properly and in accordance with applicable standards of accounting and business ethics." FAC 14. "Plaintiff asserts that the promises [were] made by the Defendants" during the time period when plaintiff was investing and/or loaning money, and plaintiff states that "absent these promises," he would not have invested and/or loaned money.
With his breach of contract claim, plaintiff asserts a claim for breach of the implied covenant of good faith and fair dealing. Defendants contend that the implied covenant merely assures compliance with the express terms of a contract, a contract which plaintiff has not properly alleged or established.
Every contract contains an implied covenant of good faith and fair dealing providing that no party to the contract will do anything that would deprive another party of the benefits of the contract.
Defendants argue that this claim necessarily fails because plaintiff has not established the elements of a contract. The undersigned, however, found that plaintiff adequately pled the elements of a breach of contract claim. Therefore, defendants' motion for dismissal on this ground will be denied.
In his August 2, 2013 motion for leave to file a supplemental pleading, plaintiff seeks leave to file a second amended complaint because he has recently come into possession of certain additional evidence that he contends would clarify his claims. Good cause appearing, this request will be granted. In so granting, the court takes note of two claims re-asserted in the first amended complaint that were found to be subject to dismissal as a matter of law upon consideration of defendants' motion to dismiss the original complaint.
Based on the foregoing, IT IS HEREBY ORDERED that:
