Judge Alison Mackenzie, Case 22SMCV01303 2023-05-18 Tentative Ruling

Judge: Alison Mackenzie, Case: 22SMCV01303, Date: 2023-05-18 Tentative Ruling

Case Number: 22SMCV01303 Hearing Date: May 18, 2023 Dept: 207

Background

Star International Market and Deli, Inc. (“Star International”) and Soraya Pourvasei (“Pourvasei”) bring this action against Defendants and Cross-Complainants Mikhael Metals, LLC (MM) and Benyamin Mikhaelfard (“Cross-Complainants”) arising from an asset purchase agreement by which MM was to acquire Star International’s goodwill, assets, and fixtures. Cross-Complainants filed a Cross-Complaint against Star International and Pourvasei (collectively “Cross-Defendants”), as well as other individuals, alleging causes of action for breach of that same purchase agreement and fraud concerning the transaction. Cross-Defendants now bring the instant demurrer to each of these causes of action and allege a misjoinder of individuals as cross-defendants in this action. Cross-Defendants’ demurrer is unopposed. The Court notes the instant demurrer makes repeated reference to a First Amended Cross-Complaint. As no such First Amended Cross-Complaint has ever been filed by Cross-Complainants, the Court will construe all references to the First Amended Cross-Complaint as references to the operative Cross-Complaint filed on March 1, 2023.

Legal Standard

When considering demurrers, courts read the allegations liberally and in context. (Wilson v. Transit Authority of City of Sacramento (1962) 199 Cal.App.2d 716, 720-21.) In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) “A demurrer tests the pleading alone, and not on the evidence or facts alleged.” (E-Fab, Inc. v. Accountants, Inc. Servs. (2007) 153 Cal.App.4th 1308, 1315.) As such, the court assumes the truth of the complaint’s properly pleaded or implied factual allegations. (Id.) However, it does not accept as true deductions, contentions, or conclusions of law or fact. (Stonehouse Homes LLC v. City of Sierra Madre (2008) 167 Cal.App.4th 531, 538.)

The general rule is that the plaintiff need only allege ultimate facts, not evidentiary facts. (Doe v. City of Los Angeles (2007) 42 Cal.4th 531, 550.) “All that is required of a plaintiff, as a matter of pleading, even as against a special demurrer, is that his complaint set forth the essential facts of the case with reasonable precision and with sufficient particularity to acquaint the defendant with the nature, source and extent of his cause of action.” (Rannard v. Lockheed Aircraft Corp. (1945) 26 Cal.2d 149, 156-157.)

Analysis

1. Meet & Confer

The Court finds Cross-Defendants have complied with the meet and confer requirements set forth under Code of Civil Procedure § 430.41. (Mokri Decl. at ¶2.)

2. Breach of Contract

To state a cause of action for breach of contract, a party must be able to establish “(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.” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.)

Cross-Defendants argue the Cross-Complaint “alleges two separate contracts, one written and one oral” citing paragraph 7 of the Cross-Complaint. (Motion at 5.) Paragraph 7 pleads the existence of a written contract only and does not mention an oral contract. It provides in full “On or about April 15,2021 Seller and Buyer entered into a written agreement for the sale and purchase of a business located at 12146 Santa Monica Blvd. Los Angeles CA 90025 for the total sum of $250,000.00 (hereinafter ‘Business’). A copy of said written agreement has been attached to the plaintiff’s complaint and marked as Exhibit ‘A’ and incorporated hereof by this reference.” (Cross-Complaint at ¶7.) As the Cross-Complaint does not allege the existence of an oral contract, the Court rejects Cross-Defendants’ arguments concerning whether the Cross-Complaint has sufficiently alleged a cause of action for breach of an oral contract.

Cross-Defendants also argue the Cross-Complaint fails to state a cause of action for breach of a written contract. If a breach of contract claim “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.” (Harris v. Rudin, Richman & Appel (1999) 74 Cal.App.4th 299, 307.) In some circumstances, a plaintiff may also “plead the legal effect of the contract rather than its precise language.” (Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 198-199.)

Cross-Defendants argue the Cross-Complaint does not sufficiently set out the verbatim terms of the contract or attach a copy of the written contract. As set forth above, paragraph 7 of the Cross-Complaint identifies the relevant contract as the same one that was attached to Plaintiffs’ own Complaint in this action, without attaching a second copy of the contract to the Cross-Complaint or otherwise quoting the terms of the contract in the Cross-Complaint itself. Cross-Defendants argue this is insufficient because the Cross-Complaint does not include a request asking the Court to take judicial notice of the contract attached to their own Complaint. Cross-Defendants offer no authority showing a pleading must contain a request for judicial notice to incorporate documents by reference, and the Court is not aware of any such authority. California favors liberal pleading requirements geared at providing notice to the parties against whom the claims are asserted. The Court finds the Cross-Complaint’s incorporation by reference of the contract attached to Cross-Defendants’ own Complaint is sufficient to give Cross-Defendants notice of the claims being asserted against them.

Cross-Defendants’ demurrer to the first cause of action for breach of contract is OVERRULED.

3. Fraud

“The elements of fraud,” including a cause of action for intentional misrepresentation, “are (a) a misrepresentation (false representation, concealment, or nondisclosure); (b) scienter or knowledge of its falsity; (c) intent to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Hinesley v. Oakshade Town Ctr. (2005) 135 Cal.App.4th 289, 294.) The facts constituting the alleged fraud must be alleged factually and with particularity as to every element of fraud, as the policy of “liberal construction” of the pleadings will not ordinarily be invoked. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.) “This particularity requirement necessitates pleading facts which ‘show how, when, where, to whom, and by what means the representations were tendered.’” (Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73 [quoting Hills Trans. Co. v. Southwest (1968) 266 Cal.App.2d 702, 707].) To properly allege fraud against a corporation, the plaintiffs must plead the names of the persons allegedly making the false representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written. (Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157.)

Cross-Defendants argue the second cause of action has not been pled with the requisite specificity. The Court agrees. The Cross-Complaint alleges several alleged issues concerning the sale of the property, including such complaints as “No employment records of the business were provided.” (Cross-Complaint at ¶8.) However, the second cause of action makes only general reference to “the representations described above” without identifying any specific representations which were alleged to be fraudulent. For example, the Cross-Complaint does not allege any Cross-Defendant made any representation regarding the provision of employment records as part of the transaction at issue, and it is thus unclear whether Cross-Complainants are attempting to base their cause of action for fraud on the failure to provide employment records. The same is true for each of the alleged defects enumerated in paragraph 8 of the Cross-Complaint.

Furthermore, the cause of action for fraud offers no specific showing as to any particular Cross-Defendant and makes blanket allegations against all Cross-Defendants. It is not clear from such generalized allegations which Cross-Defendant entities and individuals are alleged to have taken the actions alleged therein and which parties Cross-Complainant is seeking to hold liable on theories of vicarious liability.

The Court SUSTAINS Cross-Defendants’ demurrer to the second cause of action for fraud. Cross-Complainants bear the burden of demonstrating they can cure the defects in the Cross-Complaint through further amendment. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) Cross-Complainants did not oppose Cross-Defendants’ demurrer or otherwise request leave to amend their Cross-Complaint. On such facts, the Court concludes Cross-Complainants have effectively abandoned this cause of action and therefore sustains Cross-Defendants’ demurrer to this cause of action without leave to amend.

4. Misjoinder

Cross-Defendants also demurrer to the Cross-Complaint in its entirety under Code Civ. Proc. § 430.10(d), arguing the Cross-Complaint misjoins Satiar Pourvasei, Hossein Jahangiri and Sanaz Jahangiri as parties to this action even though they “do not have any relation to the action, or the allegations against them do not establish any nexus of liability to the primary tortfeasors.” (Motion at 8.) A demurrer for misjoinder will be overruled unless the moving party shows it has been prejudiced by the misjoinder. While “the code seems to authorize the sustaining of a demurrer solely [for misjoinder of parties], the authorities indicate that the defendant is entitled to a favorable ruling only when he can show some prejudice suffered or some interests affected by the misjoinder. In practical effect this means that such a demurrer can be successfully used only by the persons improperly joined. A proper defendant is seldom injured by the joinder of unnecessary or improper parties, plaintiff or defendant, and his demurrer ought to be overruled. [Citation.]” (Anaya v. Superior Court (1984) 160 Cal.App.3d 228, 231, fn. 1.)

Cross-Defendants have not shown they have suffered any prejudice from the joinder of Satiar Pourvasei, Hossein Jahangiri. or Sanaz Jahangiri in the Cross-Complaint. The Court thus OVERRULES the demurrer as to its joinder of these three individuals.

Conclusion

Cross-Defendants’ demurrer to the first cause of action for breach of contract is OVERRULED. Cross-Defendants’ demurrer to the second cause of action for fraud is SUSTAINED without leave to amend. Cross-Defendants’ demurrer based on the misjoinder of Satiar Pourvasei, Hossein Jahangiri, and Sanaz Jahangiri is OVERRULED.