Lee Booi Lim et al. v. Anavarathan Ayyaswamy et al.

Defendants’ real estate agent ordered a professional building inspection that occurred on November 2, 2022, which found water seepage in the kitchen faucet, improper installation of PVC piping, and leakage at the main at the exterior to the property. (Id. at ¶ 15.) Those 2022 reports are attached as exhibits to the Complaint, and were signed by plaintiffs in December 2022. (Complaint, exhs. E, F.) Plaintiffs allege that Defendants failed to disclose a number of material facts in the Real Estate Transfer Disclosure Statement (TDS) and Sellers’ Property Questionnaire (SPQ) that they provided to Plaintiffs. (Id. at ¶¶ 16-18.)

Seven days after the pest and home inspection reports were completed, Defendants stated in the TDS and SPQ that they were not aware of: past or present problems with pests and/or pest remediation; issues and defects related to water intrusion, leakage; past or present defects in plumbing; fungus or mold related issues and defects; or structural issues and defects. (Complaint, ¶¶ 20, 21.) Defendants also stated that both the 2022 Pest Inspection and 2022 Home Inspection were not a substitute for the declarations made in the TDS and SPQ. (Id. at ¶ 21.)

Plaintiffs allege they entered the purchase agreement in reliance on the information provided by the Defendants in the TDS and SPQ. (Id. at ¶ 22.) After taking possession of the property, Plaintiffs noticed water leaks coming into the Property in several areas, including: the garage, two bedrooms, a utility meter closet, numerous windows, the chimney, the roof, and a shut-off valve in laundry room. (Id. at ¶ 24.) Plaintiffs also discovered areas with severe mold contamination, including the Property’s heating, ventilation, and air conditioning (HVAC) system. (Id. at ¶ 25.)

Plaintiffs contracted with Mold Inspection Science, Inc. to conduct a mold inspection report, which found high levels of mold on the property. (Id. at ¶ 28.) Plaintiffs allege that dangerously high levels of mycotoxins in their blood have caused them severe physical, neurological, and emotional harm. (Id. at ¶ 29.) Plaintiffs allege that their minor son has suffered severe neurological harm, and that a diagnosis by Sutter Health Medical found that Plaintiffs’ minor son has been diagnosed with self-injurious behaviors likely aggravated by the environmental mold. (Id. at ¶ 31.)

Plaintiffs allege that they incurred $196,888.79 in costs to repair the damage to the Property caused by the undisclosed water intrusion and mold. They anticipate further repairs costing $190,000. (Id. at ¶¶ 30, 39.)

The Complaint alleges causes of action for: (1) fraud (intentional misrepresentation, concealment, and deceit), (2) breach of contract, (3) negligence, (4) negligent infliction of 7 emotional distress, (5) breach of implied covenant of good faith and fair dealing, and (6) intentional infliction of emotional distress. Defendants’ amended demurrer challenges the first, fourth, fifth, and sixth causes of action in the Complaint. Plaintiffs oppose.

DEMURRER

Legal Standard

The function of a demurrer is to test the legal sufficiency of a pleading. (Trs. Of Capital Wholesale Elec. Etc. Fund v. Shearson Lehman Bros. (1990) 221 Cal.App.3d 617, 621.) Consequently, “[a] demurrer reaches only to the contents of the pleading and such matters as may be considered under the doctrine of judicial notice.” (Mathews v. Becerra (2019) 8 Cal.5th 756, 762, internal citations and quotations omitted; Code Civ. Proc., § 430.30, subd. (a).) “It is not the ordinary function of a demurrer to test the truth of the plaintiff’s allegations or the accuracy with which he describes the defendant’s conduct. ... Thus, ... the facts alleged in the pleading are deemed to be true, however improbable they may be.” (Align Technology, Inc. v. Tran (2009) 179 Cal.App.4th 949, 958, internal citations and quotations omitted.)

In ruling on a demurrer, the allegations of the complaint must be liberally construed, with a view to substantial justice between the parties. (Glennen v. Allergan, Inc. (2016) 247 Cal.App.4th 1, 6.) Though a “demurrer admits all facts properly pleaded, [it does] not [admit] contentions, deductions or conclusions of law or fact.” (George v. Automobile Club of Southern California (2011) 201 Cal.App.4th 1112, 1120.)

Discussion

First Cause of Action: Fraud, Intentional Misrepresentation, Concealment, and Deceit

Defendants demur to the first cause of action for fraud, intentional misrepresentation, concealment, and deceit. Defendants argue the first cause of action fails to state facts with the requisite particularity and does not allege a duty to disclose, intentional suppression, or reliance sufficient to constitute a cause of action. (Demurrer, pp. 10:3-12:19.)

The elements of a cause of action for fraud based on concealment are: (1) the defendant must have concealed or suppressed a material fact, (2) the defendant must have been under a duty to disclose the fact to the plaintiff, (3) the defendant must have intentionally concealed or suppressed the fact with the intent to defraud the plaintiff, (4) the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact, and (5) as a result of the concealment or suppression of the fact, the plaintiff must have sustained damage. (Kaldenbach v. Mutual of Omaha Life Ins. Co. (2009) 178 Cal.App.4th 830, 850.)

Civil Code section 1572 prohibits a party to a contract from engaging in actual fraud by “act[ing] with intent to deceive another party thereto, or to induce him to enter into the contract.” (Civ. Code, § 1572.) Civil Code section 1709 states that fraudulent deceit occurs when: “[o]ne...willfully deceives another with intent to induce him to alter his position to his injury or risk.” (Civ. Code, § 1709.)

Plaintiffs allege that Defendants intentionally made fraudulent representations to Plaintiffs by stating in the TDS and SPQ that they were unaware of any defects in the home. Plaintiffs maintain that Defendants’ statements in the TDS and SPQ that they were unaware of any past or present defects in the home intentionally concealed and fraudulently suppressed information. Plaintiffs allege that Defendants’ statements were false because the real estate agent acting on behalf of Defendants ordered a pest inspection report and a home inspection report, which listed a number of defects in the home. (Complaint, ¶¶ 51, 52.)

Plaintiffs allege Defendants knew that their statements in the TDS and SPQ were false because they had received those reports and were thus on notice of defects in the home. (Complaint, ¶ 51.) In the SPQ, Defendants declared that they were not aware of any past or present problems with pests, water, water intrusion, mold, or past repairs of pest infections on the property. (Complaint, ¶ 51.) Plaintiffs allege that two pest reports, one from 2022 and one from 2004, found termites in various areas of the home, and that a 2022 home inspection report found water seepage in the kitchen faucet, improper installation of PVC piping, and evidence of present leakage exterior to the property, among other issues. (Complaint, ¶¶ 15, 52.)

Plaintiffs allege that the Defendants’ “intentional concealment is further exacerbated by the comments from the 2004 Pest Inspector whereby the 2004 Pest inspector notes the following: ‘This structure was fumigated by others in 2001 for the control of drywood termites and it appear [sic] these pellets are from this previous infestation. In the presence of the inspector, the drywood termite pellets were removed by interested parties.’” (Complaint, ¶ 52.) Plaintiffs allege that because the only parties mentioned in the report are the inspector and Defendant Subramanian, the interested party who removed the pellets must have been Defendant Subramanian. (Complaint, ¶ 53.)

Plaintiffs allege Defendants made other misrepresentations in the SPQ and TDS regarding shared walls and deed restrictions. (Complaint, ¶ 55.) Plaintiffs allege “that the Seller has experience in intentionally concealing material defects that reduce the Property’s desirability and value, with regards to the inspection of their property” and has “demonstrated a repeated pattern of recklessly and carelessly suggesting facts that are not true.” (Complaint, ¶¶ 53, 54.)

Plaintiffs’ Complaint fails to state a cause of action for fraud against either Defendant. The Complaint does not adequately allege that either Defendant owed a duty to disclose to Plaintiff; that either Defendant acted with intent to induce Plaintiffs’ reliance; or that Plaintiffs detrimentally relied on Defendants’ statements. Plaintiffs cite Civil Code section 1102 to establish that Defendants had a statutory duty to disclose independent of a contractual duty to disclose. But that statute generally describes sellers’ disclosure obligations, and Plaintiffs do not elaborate on how Defendants violated a statutory duty to disclose. (Complaint, ¶ 44; Civ.

Code, § 1102, et seq.) The Complaint also fails to allege intent to induce reliance or reliance. The Complaint alleges that Defendants provided Plaintiffs with the 2022 pest inspection and home inspection reports before they entered into the sale contract. Plaintiffs thus had at least constructive knowledge of the contents of those reports. The Complaint attaches copies of those reports, which indicate not only that Plaintiffs received reports disclosing the same material facts they claim Defendants concealed, but also that Plaintiffs signed those reports. (Complaint, exhs.

E and F.) Plaintiffs’ allegation that Defendants intentionally concealed, misrepresented, or suppressed information to induce Plaintiffs’ reliance is inconsistent with the allegations that Defendants provided Plaintiffs the 2022 reports.

Defendants also contend that the “Complaint does not allege how Defendants acquired knowledge of the alleged defects, when they acquired it, or what specific information they possessed.” (Demurrer, p. 12:16-19.) But the 2004 and 2022 reports, along with related allegations, are sufficient to allege that Defendants had notice of past defects to the home such 9 that statements in the TDS and SPQ that Defendants were unaware of past defects could have been knowingly false. Defendants also challenge Plaintiffs’ first cause of action on the basis that it insufficiently pleads punitive damages. (Demurrer, p. 4:4-19.)

But a “demurrer cannot rightfully be sustained to part of a cause of action or to a particular type of damage or remedy.” (Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1047 (Kong).) The court sustains Defendants’ demurrer to Plaintiffs’ first cause of action for fraud solely on the grounds articulated above.

A plaintiff bears the burden of proving an amendment would cure any defect identified on demurrer. (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081.) Plaintiffs’ opposition failed to meet that burden. But because this is the first pleading challenge, the court will grant leave to amend.

Defendants’ demurrer to Plaintiffs’ first cause of action for fraud is SUSTAINED WITH LEAVE TO AMEND.

Fourth Cause of Action: Negligent Infliction of Emotional Distress

Defendants demur to fourth cause of action for negligent infliction of emotional distress, arguing that negligent infliction of emotional distress is not an independent cause of action. Defendants argue the Complaint fails to plead breach of a duty giving rise to tort liability; fails to allege facts sufficient to state a claim under either a bystander or direct victim theory; and does not adequately plead causation or legally cognizable emotional distress damages. (Demurrer, pp. 13:23-15:21.)

“Negligent infliction of emotional distress is not an independent tort, but the tort of negligence.” (Downey v. City of Riverside (2024) 16 Cal.5th 539, 547, internal quotation marks and citations omitted.) “California courts have recognized a plaintiff’s right to recover in negligence for serious emotional distress suffered as a result of witnessing injuries inflicted on a close relative.” (Id. at p. 543.) Negligent infliction of emotional distress can thus be an independent cause of action. (See Spates v.

Dameron Hospital Assn. (2003) 114 Cal.App.4th 208, 214 [“[A] cause of action to recover damages for negligently inflicted emotional distress will lie...in cases where a duty arising from a preexisting relationship is negligently breached.”]; Molien v. Kaiser Foundation Hospitals (1980) 27 Cal.3d 916, 930 [“[w]e hold that a cause of action may be stated for the negligent infliction of serious emotional distress.”].) “[P]laintiff must have suffered trauma from perceiving the injury-producing event, itself rather than on viewing or learning about the injurious consequences of [the defendant’s] conduct.” (Downey v.

City of Riverside, supra, 16 Cal.5th at p. 559, internal citations and quotation marks omitted.) The “understanding perception of the injury-causing event is an essential component of [negligent infliction of emotional distress] recovery. In the case of an event which cannot be perceived, distress recovery is not allowed.” (Golstein v. Superior Court (1990) 223 Cal.App.3d 1415, 1427 [rejecting petitioners’ claim for negligent infliction of emotional distress where surviving parents observed medical treatment resulting in death of son because the fatal dosage was of radiation, which cannot be seen].)

The fourth cause of action does not adequately allege duty. The Complaint states that Defendants owed “a heightened duty of care beyond reasonableness, which requires honest disclosures to be made pursuant to Civ. Code § 1102.” (Complaint, ¶ 72.) But as already discussed, Civil Code section 1102 generally describes sellers’ disclosure obligations, and 10 Plaintiffs do not elaborate on how that statute, or any statute, establishes that Defendants had a duty to protect Plaintiffs from emotional distress. (Civ. Code, § 1102, et seq.)

The Complaint also fails to state facts sufficient to state a claim because the Complaint does not allege any sudden, traumatic, injury-producing event that Plaintiffs contemporaneously observed. The Complaint alleges that Plaintiffs suffered emotional distress upon learning that their son was severely injured by mold. (Complaint, ¶ 79.) But Plaintiffs allege that they experienced trauma “on viewing or learning about the injurious consequences of [the defendant’s] conduct,” not from perceiving an injury-producing event. (Downey v.

City of Riverside, supra, 16 Cal.5th at p. 559, internal citations and quotation marks omitted.) And even if the Complaint alleged that the injury Plaintiffs’ son suffered caused Plaintiffs emotional distress, the allegations do not support a claim for negligent infliction of emotional distress because the injury of mold contamination, like radiation, cannot be perceived. The Complaint does not state facts sufficient to state a claim for negligent infliction of emotional distress.

Defendants’ demurrer also argues that Plaintiffs’ Complaint does not adequately allege facts to sustain a claim for negligent infliction of emotional distress under a direct victim theory. Plaintiffs’ Complaint alleges that they each directly experienced severe emotional distress due to Defendants’ conduct, but does not articulate specific facts or develop the points further. (Complaint, ¶ 48.)

Defendant’s demurrer to the Complaint’s fourth cause of action for negligent infliction of emotional distress is SUSTAINED WITH LEAVE TO AMEND.

Fifth Cause of Action: Breach of Implied Covenant of Good Faith and Fair Dealing

Defendants demur to the fifth cause of action for breach of implied covenant of good faith and fair dealing on the basis that the Complaint does not allege conduct separate from the Complaint’s claim for breach of contract. “The law implies a covenant of good faith and fair dealing in every contract. The covenant prevents one contracting party from unfairly frustrating the other’s right to the benefits of the agreement actually made.” (Tuli v. Specialty Surgical Center of Thousand Oaks, LLC (2024) 105 Cal.App.5th 997, 1020 (Tuli), internal citation omitted.)

Plaintiffs’ Complaint alleges that “Defendant breached the express term of the Purchase Agreement by failing to deliver to buyer fully completed disclosures and the disclosures that were delivered were full of fraudulent representations and therefore incomplete...[and] breached the implied covenant by holding those fraudulent representations out as true to the Plaintiffs who were dealing in good faith.” (Complaint, ¶ 86.) Plaintiffs further allege that “Defendant[s] acted in bad faith and unfair dealing by failing to disclose known defects.” (Ibid.)

Here, Plaintiffs’ Complaint fails to allege the “particular ways” in which Defendants “unfairly frustrated the goals and operation of its operating agreement.” (Tuli, supra, 105 Cal.App.5th at pp. 1020-1021.) The fifth cause of action alleges only that Defendants breached an express term of a contract and “breached the implied covenant by holding those fraudulent representations out as true to the Plaintiffs who were dealing in good faith.” (Complaint, ¶ 86.) 11 Plaintiffs fail to allege sufficient facts distinguishing their breach of implied covenant of good faith and fair dealing claim from their breach of contract claim.

Defendants’ demurrer to Plaintiffs’ fifth cause of action for breach of implied covenant of good faith and fair dealing is SUSTAINED WITH LEAVE TO AMEND.

Sixth Cause of Action: Intentional Infliction of Emotional Distress

Defendants demur to the sixth cause of action for intentional infliction of emotional distress, arguing that the Complaint fails to allege facts sufficient to find that Defendants’ conduct was outrageous as a matter of law or that Defendants intended to cause, or recklessly disregarded the probability of, causing emotional distress. (Demurrer, pp. 17:19-18:27.)

To state a cause of action for intentional infliction of emotional distress a plaintiff must show: (1) outrageous conduct by the defendant; (2) the defendant’s intention of causing or reckless disregard of the probability of causing emotional distress; (3) the plaintiff’s suffering severe or extreme emotional distress; and (4) actual and proximate causation of the emotional distress by the defendant’s outrageous conduct. (Vasquez v. Franklin Management Real Estate Fund, Inc. (2013) 222 Cal.App.4th 819, 833.) “In order to avoid a demurrer, the plaintiff must allege with great specificity the acts which he or she believes are so extreme as to exceed all bounds of that usually tolerated in a civilized community.” (Ibid., internal citation and quotation marks omitted.)

Plaintiffs’ Complaint alleges that Defendants’ “breach of contract, violation of the statutory duty to disclose material defects in the Property, combined with their intentional concealment of those defects, reckless disregard for the sanity and mental health of the Plaintiffs, combined with a malicious intent to deceive and maximize the sale value of the Property at the expense of the Plaintiffs rise to the level of extreme and outrageous.” (Complaint, ¶ 90.)

Defendants’ alleged conduct is not so extreme to exceed all bounds of that usually tolerated in a civilized community. Plaintiffs’ allegations regarding Defendants concealing information is inconsistent with the 2022 reports attached to the Complaint that were signed by Plaintiffs. And Plaintiffs have not pleaded facts establishing that Defendants intended to cause emotional distress by denying knowledge of past or present defects.

Defendants also challenge Plaintiffs’ cause of action for intentional infliction of emotional distress on the basis that it insufficiently pleads punitive damages. (Demurrer, p. 20:1-28.) “[A] demurrer cannot rightfully be sustained to part of a cause of action or to a particular type of damage or remedy.” (Kong, supra, 108 Cal.App.4th at p. 1047.) As such, the court sustains Defendants’ demurrer to Plaintiffs’ cause of action for intentional infliction of emotional distress solely on the grounds articulated above.

Defendants’ demurrer to Plaintiffs’ sixth cause of action for intentional infliction of emotional distress is SUSTAINED WITH LEAVE TO AMEND.

I. CONCLUSION

Defendants’ demurrer to the Complaint’s first, fourth, fifth, and sixth causes of action is SUSTAINED WITH LEAVE TO AMEND. Any amended pleading must be filed and served no later than August 28, 2026.

The court will prepare the order.

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