Escobar v. Root

Opinion

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4 ,fl'{: /lf}t..,_ __ 5 GUAM--1 IN THE SUPERIOR COURT OF GUAM . 6

JOHN PAUL ESCOBAR JOHN ESCOBAR and and JORDANNA JORDANNA CIVIL CIVIL CASE CASE no. NO.CVOl57-24 CV0157-24 7 NEDEDOG ESCOBAR, 8 Plaintiffs, 9

vs. DECISION AND ORDER DECISION 10 Re: Defendants' Re: Defendants' Motion Motion to to Dismiss Dismiss ARTHUR SCOTT SCOTT ROOT ROOT JR. db LOTS JR. dba LOTS OF OF ART TATTOO ART TATTOOSTUDIO STUDIOand and JACQUELINE 13 13 Defendants. 14

15 15

16 16 This matter matter came came before Honorable Arthur R. Barcinas the Honorable before the Barcinas on on November November 7, 2024 for a

17 17 motion hearing hearing on Defendants Arthur Scott Defendants Arthur Scott Root, Jr., Jr., db dba Lots of of Art ArtTattoo Tattoo Studio, Studio, and and 18 18 Jacqueline Jacqueline Cruz CruzRoot Root ((collectively, collectively, "Defendants") "Defendants") Motion to Dismiss ("Motion"). Defendants ("Motion"). Defendants 19 represented by Attorney Jeffrey Cook, and Plaintiffs were represented Plaintiffs John John Paul Paul Escobar Escobarand and Jordanna Jordanna 20 20 Nededog Escobar Nededog Escobar (collectively, "Plaintiffs") were represented by Attorney (collectively, "Plaintiffs") Attorney Charles Charles H. 21

22 22 McDonald II. McDonald IL Upon Uponconsideration consideration ofofthe thepleadings, pleadings, the the arguments, arguments, and and the applicable law, the the

23 23 Court DENIES Defendant's Motion. Motion. 24 24 BACKGROUND 25 25 On July 1, 2022, 2022, the the parties parties allegedly entered into allegedly entered into an Agreement for for Purchase Purchase and Sale 26 26

27 of Business of Business Assets Assets("Agreement") ("Agreement") regarding regardingthe thesale saleofofLots Lotsof ofArt Art Tattoo Tattoo Studio Studio("LOA") ("LOA") 27

28 28 from Defendants firm Defendants to to Plaintiffs Plaintiffsfor for$200,000.00. $200,000.00. Plaintiffs Plaintiffsallege allegethat, that, after afterpayment, payment, Defendants Defendants Decision Decision and and Order Re: Defendant's Deflendant's Motion Motion to to Dismiss CivilCase Civil Case No. CV0157-24, CVO 157-24, Root v. Escobar

rescinded the contract. rescinded the contract. Plaintiffs then then sued sued for for fraudulent fraudulent misrepresentation, largely based on misrepresentation, largely 1

2 allegations that the allegations that the terms terms of of the written Agreement were were different different than than what what the the parties parties had had

3 previously agreed to verbally, e.g., that the Agreement that the Agreement would not allow Plaintiffs Plaintiffs to to acquire acquire the 4 trade name name of of the the company company as asPlaintiffs Plaintiffs allegedly expected. Plaintiffs Plaintiffs also also sued sued for for declaratory declaratory 5 relief as relief as to to whether whether the the Agreement Agreement is valid, as is valid, as well wellas as damages damages for for Defendants' Defendants' alleged allegedunjust unjust 6

enrichment andbreach enrichment and breachofofthe theimplied impliedcovenant covenantofofgood goodfaith faithand andfair fairdealing. dealing. Plaintiffs claim 7

8 that they did that they did not know know what was in the Agreement Agreement because they allegedly because they allegedly did not have have the the

9 opportunity to review opportunity to review the Agreement prior to signing it. 10 10 On June 20,2024, June 20, 2024,Defendants Defendantsfiled filed this thisMotion Motion on the grounds grounds that thatPlaintiffs Plaintiffs had failed had failed 11 to state state a claim upon which relief can can be granted, arguing that granted, arguing that the the facts facts alleged alleged in in Plaintiffs' 12 12

13 13 Complaint do not support supportPlaintiffs' Plaintiffs' causes of action. causes of

14 14 On July July 26, 26, 2024, 2024, Plaintiffs Plaintiffs filed filed their their Opposition, Opposition, re-asserting re-asserting their their claims claims for 15 fraudulent misrepresentation,declaratory fraudulent misrepresentation, declaratoryrelief, relief,and andbreach breachofofthe theimplied implied covenant covenant of of good 16 16 faith and fair dealing. Plaintiffs and fair Plaintiffs made made no mention mention of oftheir their claim claim for for unjust unjust enrichment. 17 17

On August 9, 2024, Defendants filed 2024, Defendants filed their Reply, re-asserting re-asserting that they did not coerce that they 18

19 19 Plaintiffs into Plaintiffs signingthe into signing thecontract, contract, and and that that Plaintiffs Plaintiffs stated stated in in the the Complaint Complaint that that Defendants Defendants

20 20 informed Plaintiffs Plaintiffs of ofthe the royalty royalty provision provision before beforethey they signed signed the the contract. contract. 21 DISCUSSION 22 22 The issue issue before the Court is whether whether Plaintiffs Plaintiffs have have sufficiently sufficiently pleaded pleaded claims claims upon upon 23

which relief may may be be granted. granted. The The central central arguments by the parties arguments by focus mainly parties focus mainly on the the 24 24

25 allegations asserting fraud with little asserting fraud little discussion discussion of ofthe the other other causes causes of ofaction. action. Defendants Defendants assert assert

26 26 that there is no fraudulent misrepresentation, arguing fraudulent misrepresentation, arguing that thatthe theAgreement Agreement shows the final terms terms 27 of ofthe the contract, and that contract, and thatPlaintiffs Plaintiffs initialed initialed each each page pageof of the the Agreement Agreement in addition to to signing it, 28

Page 22 of Page of 10 10 Decision and Order Re: Decision Re: Defendant's Defendant's Motion Motion to Dismiss Civil Case Civil Case No. CV0157-24, Root v. Escobar

which Defendants claim shows that Plaintiffs read each page before signing. Defendants further 1

2 assert that the Agreement clearly states at paragraph paragraph 13 that Plaintiffs would not be acquiring acquiring

3 the trade name of the company, but the right to use the trade name upon payment of of a $1,500.00 4 monthly monthly royalty. Based on these royalty. Based these assertions, Defendants argue assertions, Defendants argue that that they they did did not not make make any 5 fraudulent misrepresentationnor fraudulent misrepresentation nor conceal concealany any information information about about the the trade trade name name clause. clause. 6

Defendants also assert that Plaintiffs were under no duress to sign the Agreement, nor were they 7

8 prevented from consulting with counsel prior to to signing signing the Agreement.

9 I. 1. Legal Standard 10 Guam Rules of of Civil Civil Procedure Procedure ("GRCP") Rule Rule l12(b)(6) 2(b)(6) allows allows a court to dismiss dismiss aa 11 complaint for for failure failure to to state state aa claim claim upon upon which relief can be granted. See Guam granted. See Guam R. R. Civ. P. 12

13 13 12(b)(6). Guam law 12(b)(6). Guam law requires requires only only a short and plain statement of the claim showing entitlement

14 to relief. Ukase Ukau v. Wang, ,r 52. Whether Wang, 2016 Guam 26 1152. Whether aa plaintiff plaintiff pleaded pleaded or or proved proved his his claim by

15 15 preponderance of the evidence is immaterial at the I12(b)(6) phase, Plaintiff Plaintiff merely has to state preponderance of )(6) phase; 16 16 sufficient sufficient facts to place Defendant Defendant on on notice notice of ofhis his claim. claim. Wang, Wang, 2016 2016Guam Guam26 ,r 261153. 17 17 While a complaint complaint attacked by a Rule attacked by Rule l2(b)(6) 12(b)(6) motion motion to to dismiss dismiss need need not not contain contain 18 18

19 detailed factual factual allegations, allegations, aa plaintiffs plaintiffs obligation obligation to to provide provide the grounds of of his entitlement entitlement to

20 20 relief relief "requires more than labels and conclusions, and a formulaic recitation of of the elements of of a 21 21 cause of action action will will not do." Wang, ,r 26. Beyond Wang, 2016 Guam 26 1126. Beyond this, this, the Supreme Court has 22 22 declined the invitation to apply a heightened plausibility standard standard to local civil proceedings, and 23

24 24 it imposes only aa liberal liberal notice notice pleading pleading requirement. requirement. See id. ,r 33. When id. at 1133. When reviewing reviewing a Rule

25 l2(b)(6) motion, 12(b)(6) motion, the the trial trial court must construe court must the pleading construe the pleading in in the light most favorable favorable to the

26 26 non-moving party and resolve all doubts in the the non-moving non-moving party's party'sfavor. favor. Id. ,r In ruling Id. atat 1151. 27 on aa 12(b)(6) motion, a court's consideration 12(b)(6) motion, consideration is limited limited to to the the complaint, complaint, written written instruments instruments 28 28

Page Page3 of 10 Decision and Order Re: Decision Re: Defendant's Defendant's Motion Motion to Dismiss Civil Case No. No. CV0157-24, CV0157-24, Root v. Escobar

attached to the complaint as exhibits, statements or documents documents incorporated incorporated in the complaint by 1

2 reference, and documents documents on on which the complaint heavily relies. Core Tech Inf? Corp. v. Tech Int'! v. Hamil Hanil

3 Eng. & Constr. Eng. Guam 13 Co., 2010 Guam Constr. Co., ,I 13 1129. 4 II. 11. Fraudulent Misrepresentation 5 Under Guam Under Guam law, law, there there are are five five elements elements of offraud: fraud: (1) (1) AAmisrepresentation, misrepresentation; (2) (2) 6

Knowledge Knowledge of falsity falsity (or (or scienter), scienter); (3) Intent Intent to to defraud defraud to to induce induce reliance; reliance; (4) (4) Justifiable Justifiable 7

8 reliance, reliance; and (5) (5) Resulting Resulting damages. damages. Ukau Ukau v. v. Wang, Wang, 2016 2016 Guam Guam 26 ,I 36. 26 11 36. "[GRCP] "[GRCP] 9(b) 9(b) 9 provides, provides, in relevant part, part, that "the circumstances circumstances constituting fraud fraud or mistake shall be stated stated 10 with particularity" and that "[m]alice, particularity" and "[m]alice, intent, intent, knowledge, knowledge, and and other other conditions conditions of of mind mind of a 11 11 person may be averred averred generally." Id. ,I 35. This Id. 1135. This standard standard isis known known as as the the "who, what, when, 12

113 where, and how" requirement, and the Guam Supreme Court has held it to be a more heightened

14 standard than the the notice notice pleading pleading typically typically required required by by GRCP 12(b)(6). Id. GRCP l2(b)(6).

15 15 When the When the parties parties have have reduced the terms reduced the of an terms of an agreement agreement to to aa writing, writing, 66 GCA GCA §§ 251 2511l 16 16 prohibits the introduction introduction of any evidence of the terms of of the agreement agreement other than the content 17 17 of of the writing, except where a mistake or imperfection imperfection of the the writing writing is an issue or where the 18 18

19 validity validity of the the agreement agreement is in in dispute." dispute." Bank of of Guam Guam v Flores, Flores, 2004 Guam Guam 25 ,I 16-17. 25 1[ 16-17.

20 However, "this However, "this ... does does not exclude exclude other other evidence evidence of of the the circumstances circumstances under under which which the the 21 agreement was made agreement was made or or to to which which it it relates, relates, as as defined in [6 defined in GCA] §§ 2515 [6 GCA] 2515 [Circumstances [Circumstances to be to be 22 Considered], or to Considered], or to explain explain an extrinsic ambiguity, ambiguity, or to establish establish illegality or fraud. fraud. The term 23

agreement includes ... contracts agreement includes between parties." contracts between parties." Id. Id. 66 GCA GCA §§ 2515 2515 dictates dictates that, that, "[f]or "[f]or the the 24 24

25 25 construction of proper construction of an an instrument, instrument, the the circumstances circumstances under under which which it it is made, including the

26 26 situation of of the subject of the instrument and of the parties to to it, it, may may also be shown." 27

Page 4 of 10 Decision and Order Order Re: Re: Defendant's Defendants Motion to Dismiss Motion to Civil Case Civil Case No. CV0157-24, Root v. Escobar

Based on the circumstances of the circumstances of the case, case, the the Court Courtisis not not confined confined to to the the four four corners corners of of 1

2 the Agreement in its analysis, the Agreement as Plaintiffs dispute analysis, as the validity of dispute the ofthe the agreement, agreement, and and allege

3 fraud based on the fraud based the circumstances circumstancesunder underwhich whichthe theAgreement Agreementwas wasmade madeand andsigned. signed.Viewed Viewed in 4 the the light most favorable to to Plaintiffs Plaintiffs as as the the non-moving non-moving party, party, the the Court Court finds finds that that Plaintiffs 5 have sufficiently sufficientlymet metthe the pleading pleading standard standard for fraud, fraud, for the reasons reasonsbelow. below. 6

7 the Complaint, In the Complaint, Plaintiffs assert that "[ assert that the time "[a]t the time the the Agreement Agreement was was executed, executed,

8 Defendants knew that Defendants knew thatPlaintiffs Plaintiffs expected to to purchase purchaseLOA LOA and they knew and they knew they they were were not not selling selling

9 LOA LOA to to Plaintiffs Plaintiffsbecause because the the Agreement Agreement they they drafted drafted was not an agreement agreementto tosell sell LOA LOA and and it 10 was different different from from what whatthe the parties parties agreed agreed totoduring duringtheir theirnumerous numerous conversations." conversations."Con Compl., ,r pl., 11 11 11 46. Plaintiffs Plaintiffs further further assert that"Defendants assert that "Defendantsfraudulently fraudulentlyled ledPlaintiffs Plaintiffs to to believe believe that that Plaintiffs 12

13 acquiring ownership were acquiring ownershipof ofLOA." LOA." Id. Id. Plaintiffs Plaintiffs allege allegethat that Defendants did this Defendants did thisby by"wrongfully "wrongfully

14 with[holding] with[holding] arid and conceal[ing] conceal[ing] the the true facts from true facts from Plaintiffs," which which is is relevant relevant to to the the Court's Court's 15 15 analysis because it speaks analysis because speaks to the the circumstances surroundingthe circumstances surrounding theexecution execution of of the the Agreement. 16 16 Comal., Compl., ,rit48. 17 17 Plaintiffs Plaintiffsallege allegethat, that, in in the the time leading leading up up to the execution of of the Agreement, they they were 18

19 led to believe believe that that they they would be acquiring all of acquiring all ofLOA, LOA,including includingthe thetrade trade name. name. Plaintiffs Plaintiffs

20 20 allege allege that, that, in the week leading up up to the execution of ofthe the Agreement, Agreement, the the parties parties met met to transfer transfer 21 LOA's LOA'sbusiness business license license and and permits permits from from Defendants Defendants to to Plaintiffs, Plaintiffs,that thatDefendant Defendant Jacqueline Jacqueline 22 22 "instructed the Plaintiffs "instructed the Plaintiffs to to open open aa business business bank bank account and apply account and apply for aa credit credit card card machine machine 23

upon upon receiving their their business license," and business license," and that, "[o]n June that, "[o]n June 29, 29, 2022, 2022, Jacqueline Jacqueline informed the the 24 24

25 Plaintiffs Plaintiffs that that they take over they would take over operating operating LOA on on July July l,1,2022, 2022, as as she she was was leaving leaving Sunday, Sunday,

26 26 ,r,r 17, 20-21. July 3, 2022." Id. 1[1117, July 20-21.These Thesefacts factsindicate indicatethat thatthe theLOA LOA trade trade name name was was integral integral to the 27 transfer transfer of the the business, as the business, as the license, license, permits, and bank permits, and bank account accountwould would all all be intended intended for a 28 28

Page5ofl0 Page 5 of 10 Decision and Decision and Order Re: Re: Defendant's Motion to Dismiss Civil CaseNo. v. Escobar No. CV0157-24, Root v.

business business with with that that trade tradename, name,and andititwould would be be reasonable reasonable for purchaser to for a purchaser to believe that that they 1

2 2 be receiving would also be rightsto receivingrights tothe thetrade trade name name as as part of the agreement, of the agreement, there there being being no no verbal

3 or written or written statement statement at at that thatpoint pointsaying saying otherwise. 4 Plaintiffs further Plaintiffs further allege that, that, on on June June 30, 30, 2022, 2022, "Jacqueline "Jacqueline advised advised Plaintiffs that that the the 5 agreement papers agreement paperswere werebeing being prepared preparedby bytheir theirlawyer lawyer and andititwould would be be ready ready for on July for signing on 6

7 1, 2022, 1, 2022, the theagreed agreedupon upondate dateofofPlaintiffs' Plaintiffs'takeover takeoverof ofLOA. requested for LOA. Plaintiffs requested for aa copy copy of of

8 the Agreement to review itit prior prior to to signing signing and and to to consult consult with an attorney." Id. ,i,i attorney." Id. 23-24. There W 23-24.

9 that Defendants is no indication that Defendantsprovided provided Plaintiffs with aa copy Plaintiffs with copy of ofthe theAgreement Agreementupon upon request request 10 prior to signing. signing. 11 Plaintiffs further Plaintiffs further allege that that "[o]n o ]n July July 1,1, 2022, 2022, Plaintiffs Plaintiffsand and Defendants Defendants met at at Ruby 12

13 Tuesday Tuesday to discuss the to discuss the Agreement. Agreement. Plaintiffs Plaintiffs did not have did not have the the opportunity opportunity to review the to review the

14 Agreement prior Agreement prior to to signing signing it. it. At the the ... meeting, meeting, Defendants Defendants informed informed Plaintiffs Plaintiffs for the the first first 15 15 time that they would that they would like to charge a royalty fee fee of of$$1,500.00 I ,500.00 per month monthfor for the theuse useof of the theLOA LOA 16 name name in addition to the purchase price of purchase price of $200,000.00." ,r 25. Plaintiffs Id. 1125. $200,000.00." Id. Plaintiffs allege allege that, that, when when 17 they they asked asked Defendants for time to Defendants for to review reviewthe theAgreement, Agreement,Defendant DefendantJacqueline Jacqueline insisted insisted that that 18 18

19 they they sign on on the the spot spot because because she was leaving leaving in in two twodays, days,and andDefendants Defendants represented represented to

20 20 Plaintiffs Plaintiffs that that the the Agreement reflectedthe Agreement reflected theterms terms the the parties parties had had previously previouslydiscussed. discussed. Id. ,r Id. 1126. 21 Plaintiffs Plaintiffs allege allegethat that they they signed signed due due to tothe thetime timepressure pressure expressed expressed by by Defendant Defendant Jacqueline Jacqueline 22 22 and allege that, and that, at the the time, time, they they trusted trusted Defendants' representations based Defendants' representations basedon ontheir theirfriendship friendshipof of 23 more more than twenty (20) than twenty (20) years. years. Id. Id. Plaintiffs Plaintiffs assert assert that that the the Agreement Agreement they they signed signed did not not 24 24

25 previously reflect reflect the the agreed-upon terms, and agreed-upon terms, andallege allege that thatthey theydid didnot noteven evenreceive receive aa copy copy of the

26 Agreement until until July 20, 2022 when Defendant Jacqueline Jacqueline sent sentpictures picturesof of the the Agreement Agreement after 27 multiple requests from Plaintiffs. The requests from The sudden sudden change in terms terms without without notice notice would provide the 28

Page 6 of 10 IO Decision Decision and Order Re: Re: Defendant's Defendant's Motion Motion to to Dismiss No. CVO Civil Case No. CV0157-24, Root v. Escobar l57-24, Root

basis for a possible possible fraudulent fraudulent misrepresentation misrepresentation claim, particularly particularly because because Defendants Defendants added a 1

2 ticking ticking clock and potentially leveraged the parties' friendship, friendship, as that would speak to possible

3 inducement of inducement of the Plaintiffs' signatures. 4 Plaintiffs base Plaintiffs base their their fraudulent fraudulent representation representation claim claim on allegations that Defendants: (1) 5 not allow did not Plaintiffs to allow Plaintiffs to consult with counsel prior to to signing the Agreement, Agreement; (2) failed and 6

7 refused to disclose the Agreement refused Agreement until until after after Plaintiffs Plaintiffs paid the purchase purchase price; (3) failed failed to

8 disclose that disclose tha t the the Agreement eement did did not rreflect eflect the aactuall terms of the ms of the ver verbal ba aagreement gr aand

9 understanding understanding between between the parties; (4) the parties, 4) failed failed to disclose that to disclose that Plaintiffs Plaintiffs would acquire would only acquire lO 10 LOA's business LOA's business assets assets and not not its its trade name; (5) and failed failed to to disclose disclose that that the royalty clause II of the Agreement of could be Agreement could be terminated terminated upon upon thirty thirty (30) (30) days written notice. Id. 12

13 13 the above Given the above allegations, allegations, the Court Court finds finds that that Plaintiffs Plaintiffs have sufficiently pled their

14 fraud with particularity. claim for fraud particularity. GRCP GRCP 9(b) 9(b) provides provides that that the the intent intent to to defraud defraud and and knowledge knowledge 15 of falsity of falsity may be averred averred generally, generally, and and Plaintiffs Plaintiffs have have done done so. so. As As to to the other elements of of 16 fraud, the fraud, the Court Court finds finds that that Plaintiffs Plaintiffs have have sufficiently sufficiently pled pled the the existence existence and and details details of of one or 17 moree mis misrepresentations, r es ent a t ions ,they t hey have ha ve sufficiently f f ic ient ly pled p led their heir justified t if ied reliance elia nc e on on ssaid a id 18 18

19 misrepresentation, and misrepresentation, and they have sufficiently pied pled the damages resulting from that reliance. By

20 20 the point of of signing, Plaintiffs Plaintiffs had already invested $160,000.00 $160,000.00 into into the purchase of LOA and 21 21 had been advised by Defendants to take steps to acquire a bank account and licenses that would 22 22 apply to a business only apply business with with the trade name. Comal., the LOA trade Compl., at 2-3, 2-3, Ex. D. It would Ex. D. would not be 23

reasonable person to unusual for a reasonable to believe believe that they were acquiring the trade name as as part of the 24

25 Viewed in agreement. Viewed in the the light light most most favorable to the favorable to the Plaintiffs, Plaintiffs, the above facts, in combination 26 of tthe withh the ssudden rreveall of he r royalty provision oya lt pr ovis ion at ssigning, igning, the rrushed execution hed execut ion of tthe 27 and the failures document, and failures and delays to provide Plaintiffs with copy of wide aa copy of the the signed signed Agreement Agreement 28 28

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after after multiple multiple requests, provide sufficient requests, provide sufficient basis basis for for Plaintiffs Plaintiffs to bring bring aafraudulent fraudulent l

2 misrepresentation claim claim even even under under the heightened heightened pleading pleading standard. standard.

3 Accordingly, the the Court Court DENIES the Motion Motion to to Dismiss Dismiss in in regards regards to to the the fraudulent fraudulent 4 misrepresentation claim. claim. 5 Plaintiffs' Plaintiffs' second second claim claim for for declaratory declaratory relief reliefrequests requests the Court to to rule rule on on the thevalidity validity of of 6

the Agreement. In In the the Motion, Motion, Defendants Defendants only onlyspend spend aa cursory cursory amount amount of time time arguing arguing against against 7

8 8 reliefand declaratory relief cite no and cite no case case law law or orstatute statute to to support support their argument. In fact, argument. In fact, the the majority

9 of the the Motion Motion and and Reply Replyseem seemtotobe be dedicated dedicatedto to arguing arguingagainst againstthe thefraudulent fraudulent IO 10 misrepresentation claim, with misrepresentation claim, with little to no argument argument for the other causes causesof of relief. relief. For For instance, instance, in 11 the Complaint and Opposition, Plaintiffs and Opposition, Plaintiffs argue argue that the Agreement should be rendered that the rendered void on 12

13 the grounds that that "the "the consent was not mutual that the mutual in that the parties parties did did not all agree upon upon the same

14 thing in the same sense." Compl., same sense." Comal., at 8, 8; Opp., Opp., at 8. In the Motion Motion and and Reply, Reply, Defendants Defendants make make 15 no argument against the the consent not being mutual. mutual. nor do they they make make any any substantive substantive arguments arguments 16 regarding possible ambiguities regarding possible ambiguitiesinin interpretation interpretationofofthe the Agreement. Agreement. Therefore, Therefore, viewing viewing the the 17 allegations in the allegations in the light most most favorable favorable to the the Plaintiffs, Plaintiffs, the the Court Court finds finds that that Plaintiffs have have 18

19 provided sufficient notice of oftheir their declaratory declaratory relief relief claim claim against against Defendants. Accordingly, the Defendants. Accordingly,

20 20 Court DENIES the Motion to Dismiss on on the declaratory declaratoryrelief relief claim. 21 Regarding the the Plaintiffs' claim claim for for breach breach of ofthe the covenant covenant of of good good faith faith and and fair dealing, 22 22 the Court again finds finds that that Defendants Defendantsprovide provideonly only aa minimal minimal response responsetotoPlaintiffs' Plaintiffs' claim claim and and 23

then return to to arguing against fraudulent misrepresentation. misrepresentation. Defendants do argue argue that the Guam 24 24

25 25 hasheld Supreme Court has that"the heldthat "therelevant relevant case caselaw law supports supportsthe thenotion notionthat thataa'covenant 'covenantof of good good

26 26 faith and fair dealing and fair dealing ... cannot cannot impose substantive duties or substantive duties or limits on on the the contracting contracting parties parties 27 27 beyond those incorporatedin those incorporated in the the specific specific terms terms of their agreement." agreement." Quuano Quijano v. Atkins-Kroll, Atkins-Kroll, 28 28

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Inc., 2008 2008 Guam 14 1 Guam 14 ii 2, 2, n.2. n.2. However, the the Court Court notes notes that that the the case case quoted quoted by the the Supreme Supreme 1

2 Court Court in the the above above Quyano Quijano footnote footnote also holds that also holds that "[t]he "[t]he covenant of good faith covenant of faith and and fair

3 dealing, dealing, implied by law in in every every contract, contract, exists exists merely merely to to prevent prevent one one contracting contracting party party from 4 unfairly unfairly frustrating the other frustrating the otherparty's party's right right to to receive the the benefits benefits of ofthe the agreement agreement actually actually 5 made." made." Guz Guz v. Bechtel Nat. Inc., 88 P.3d 1089, Bechtel Nat. 1089, 1110 (Cal. 2000) 1110 (Cal. 2000) (citing Waller Waller v. v. Truck Truck Ins. Ins. 6

7 Exchange Inc. 900 P.2d 619 619 (Cal. (Cal. l1995)). Plaintiffs Plaintiffscite citethis this same same quote quote in in their their Opposition, Opposition, and and

8 argue that Defendants' argue that Defendants' termination terminationof of the the royalty agreement frustrated frustratedtheir theirright right to to receive receive the

9 benefits benefits of of the the Agreement. Agreement. Plaintiffs Plaintiffs assert assert that that much much of ofthe the inventory inventory they theypurchased purchased was was 10 10 branded with the branded with the LOA LOA trade trade name name and that Defendant's and that Defendant'stermination terminationof ofPlaintiffs' Plaintiffs' use use of of the the 11 trade name forced them to cease trade name cease operations, rebrand, and operations, rebrand, and open open aa new new tattoo tattoo shop. shop. The Court Court 122 1

13 13 also also notes notes that that Plaintiffs' Plaintiffs' allegations allegations indicate indicate that that Defendant Defendant Jacqueline Jacqueline had had assisted assisted the the

14 1 Plaintiffs in in acquiring acquiring business licenses and business licenses and permits permits specific specific to to LOA, LOA, and and that that Defendant Defendant 15 Jacqueline had Jacqueline hadalso alsoinstructed instructedPlaintiffs Plaintiffs "to "to open open aa business business bank account account and and apply apply for for a credit 16 card machine machine upon upon receiving receiving their business license," which presumably business license," presumably would also have been 17 17 under the the LOA business business name. name. Defendants make make no no response response to to this argument argument or or any any reference reference 18

19 to the covenant covenant of of good faith and fair dealing and fair dealing in their their Reply. Reply.

20 20 Therefore, the Court again finds that, that, read read in in the the light light most most favorable favorable to to the the Plaintiffs, 21 Plaintiffs have have provided sufficient notice provided sufficient notice of their their claim claim against against Defendants, Defendants, and and Defendants Defendants 22 22 have failed failed to to substantively substantively respond respond to their their arguments. arguments. The Court again DENIES the Motion to 23 23 Dismiss in regard to to the the breach breachof of the thecovenant covenantof of good good faith and fair dealing claim. and fair 24 24

25 The final final count count in Plaintiffs' Plaintiffs' Complaint Complaint isisfor forunjust unjust enrichment. enrichment. Under Guam law, a 26 26 person person is unjustly enriched if unjustly enriched if that person receives a benefit at that person at another's another's expense. expense. Yoshida Yoshida v. v. 27 27 Guam Guam Transport Transport and and Warehouse, Inc., 2013 Warehouse, Inc., Guam 5 1]69. 2013 Guam 69.In Intheir their Motion, Motion, Defendants do not 28

Page 9 of 10 Decision Decision and Re: Defendant's and Order Re: Defendant's Motion Motion to to Dismiss Dismiss Civil Case No. CV0157-24, Root Civil Case Roe! v. Escobar

make make any any mention mention of of unjust unjust enrichment, nor do enrichment, nor do they they argue argue against against the the claim. claim. Because Because 1

2 Defendants have not argued to dismiss dismiss the fourth fourth claim claim for forunjust unjust enrichment, enrichment, and and because because the

3 Court finds that Plaintiffs have provided sufficient that Plaintiffs sufficient notice notice of oftheir theirunjust unjust enrichment enrichment claim, the 4 Court DENIES the Motion Motion to Dismiss Dismiss as to Plaintiffs' Plaintiffs' claim claimfor forunjust unjust enrichment. enrichment. 5 III. Leave to Amend Amend 6

Plaintiffs request leave to request leave to amend amend in in the the event event ofofdismissal. dismissal. Defendants Defendants argue argue that that 7

8 amendment wouldbe amendment would be futile futile because Plaintiffs have because Plaintiffs have already already alleged alleged that they were informed that they informed

9 about the the royalty royalty clause clausebefore before signing signing the the Agreement. Agreement. 10 Pursuant Pursuant totoGRCP GRCP 15(a)(l), l5(a)(l), a aparty partymay mayamend amendits its pleading pleading once once as as aa matter matter of of course course 11 II within within (1) 21 21 days days alter after serving serving said pleading or (2) 21 pleading or 21 days days alter after service service of of aa responsive responsive 12

113 3 pleading or 12(b), pleading or or(f) (e), or l2(b), (e), (f)motion, motion,whichever whicheverisisearlier. earlier. The The Court Court finds finds upon upon review of of the the

14 record record that Plaintiffs have that Plaintiffs have passed the time passed the time in which to amend amend their pleading as a matter pleading as matter of 15 15 course, but under course, but underGRCP GRCP 15(a)(2), Plaintiffs may still still amend amend their their pleading pleading with the the Court's Court's 16 16 leave, which the Court has the discretion has the discretion to to grant grant freely freely when justice so so requires. There being requires. There 17 17 no dismissal this case, dismissal in this case, however, however, the the Court Court does does not find it necessary necessary for the the Court Court to to grant grant 18 18

19 19 leave leave to amend amend at this time. time.

20 21 Based on the foregoing, the the Court Court hereby hereby DENIES Defendants' Defendants' Motion to Dismiss Dismiss in in 22 22 fun. full. 23 23 FEB O FEB 2 □25 [1562025 24 IS SO so ORDERED ORDERED - - - - - - - - - - 25 25

~ 26 26

27 HON RABLE ARTHUR ARTH~R R. R. BARCINAS 28 Judge, Superior Court of Guam

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