Judge: Alison Mackenzie, Case: 22STCV30773, Date: 2023-12-05 Tentative Ruling
Case Number: 22STCV30773 Hearing Date: December 5, 2023 Dept: 55
NATURE OF PROCEEDINGS: Demurrer of Cross-Defendant Gary Stiffelman
to Second Amended Cross-Complaint of Cross-Complainant Elliot Lander.
The demurrer is
overruled. Twenty days to answer.
On 7/28/23, Cross
Complainant filed a Second Amended Cross-Complaint alleging that Cross-Defendant
in his capacities as manager, investor and attorney for the Global Hotel
Project, breached fiduciary duties and committed fraud, as to investors including
Cross-Complainant. The Cross-Complaint’s
listed causes of action are: 1. Breach of
Contract; 2. Breach of the Implied
Covenant of Good Faith and Fair Dealing;
3. Breach Of Fiduciary Duties; 4.
Fraud and Deceit (False Promise); 5.
Constructive Fraud; 6. Intentional
Interference With Advantageous Business Relationships; 7. Conspiracy; 8. Declaratory Relief; 9. Implied Indemnity; 10. Comparative Indemnity; 11. Specific Equitable Indemnity; and 12. Legal Malpractice.
Cross-Defendant filed a
demurrer to the Second Amended Cross-Complaint’s Third through Sixth and Eighth
through Twelfth Causes of Action. Cross-Complainant opposes the demurrer.
Statute
of Limitations – Third, Fourth, Fifth, Twelfth Causes of Action
Cross-Defendant argues
that the third, fifth, and twelfth causes of action are barred by the one-year,
legal malpractice statute of limitations. Code of Civil Procedure Section
340.6(a) states that the limitations period to file an action for legal
malpractice is one year after actual or constructive discovery, or four years
after occurrence of the wrongful act or omission, whichever is first. Jocer
Enterprises, Inc. v. Price (2010) 183 Cal. App. 4th 559, 566. As to each cause of action where the gravamen
is legal malpractice, the statute of limitations of CCP Section 340.6 is
applicable. Leasequip, Inc. v. Dapeer
(2002) 103 Cal.App.4th 394, 401. Actual fraud claims are expressly exempt from
the limitations period. CCO § 340.6(a)(2). Demurrers do not lie as to only parts
of causes of action, where some valid claim is alleged. Poizner v. Fremont General Corp.
(2007) 148 Cal.App.4th 97, 119 (“A demurrer must dispose of an
entire cause of action to be sustained.”).
Cross-Defendant argues
that the three-year limitations period in Code of Civil Procedure Section 338(d)
for a fraud claim bars the fourth cause of action because Cross-Complainant
alleges he made a commitment “to invest” with Cross-Defendant “based on
financial and business representations made to him in late 2017, and [he] fully
invested by early 2018” (SACC, at ¶ 3; id., 60). Cross-Defendant reasons
that the fraud claim alleged in the SACC therefore is untimely.
“Code of Civil Procedure section 338,
subdivision (d), effectively codifies the delayed discovery rule in connection
with actions for fraud, providing that a cause of action for fraud ‘is not to
be deemed to have accrued until the discovery, by the aggrieved party, of the
facts constituting the fraud or mistake.’” Brandon G. v. Gray (2003) 111
Cal. App. 4th 29, 35. Claims of fraud by
operation of statute are deemed accrued upon the discovery of the facts
constituting the fraud, which means when the plaintiff suspected or reasonably
should have suspected that wrongdoing in their lay and not legal senses, since
the specific facts can be developed in pretrial discovery. Kline v. Turner (4th Dist.
2001) 87 Cal. App. 4th 1369, 1373-1374 (citing, e.g., CCP §338(d)).
The continuing violation
doctrine permits recovery for actions that take place outside the limitations
period that are sufficiently linked to unlawful conduct occurring within the
limitations period, based on a continuing pattern and course of conduct, as
opposed to unrelated, discrete acts. Komarova
v. National Credit Acceptance, Inc. (2009) 175 Cal.App.4th 324, 343.
Here, the SACC alleges
Cross-Defendant’s multiple roles as manager, administrator, investor and
attorney. (SACC, ¶¶ 51, 64.) Given that Cross-Complainant’s claims are based on
Cross-Defendant’s multiple roles, the one-year limitation period related to
legal malpractice is not applicable to any one entire cause of action in
the SACC, and a demurrer cannot legitimately attack only part of a cause
of action.
In addition, the SACC alleges
delayed discovery of bases to sue for fraud by way of the Glenroy bankruptcy
proceeding (e.g., SACC, ¶ 37) and Cross-Defendant’s request for judicial notice
of a complaint in another case by another party does not necessarily reveal
that Cross-Complainant should have suspected or known of grounds to sue in this
case (RJN, ex., A). The accrual of damages was allegedly delayed (e.g., SACC, ¶¶ 37, 48), fraudulent concealment of
grounds to sue is alleged (e.g., ¶ 67), continuing
wrongs are alleged (e.g., ¶ 28 (“continuous misrepresentations….”), 37) and an
exception to the legal malpractice limitations period is alleged based upon
extensive allegations of fraud (e.g., ¶
25 (“all of the aforesaid
representations were false and untrue….”)).
Additionally, the Court
cannot disregard allegations that Cross-Defendant had also acted extensively in
management and administration (demurrer, 6:3-5), because under the limited
demurrer procedure allegations are assumed to be true (e.g.., SACC, ¶¶ 10 (“have total control over the administration
and financial management of the GHP and represented that they would exercise
such administrative control competently….”),
51 (“attorney, and as one of the
principal de facto managers and owners of the GHP,… due to their managerial and
organizational roles and professional credentials, owed CC LANDER, as a client
of CD GARY and as a minority passive investor owner, a strict fiduciary duty of
confidentiality, loyalty and care….” )). The Court therefore overrules the
demurrer to the third, fourth, fifth, and twelfth causes of action.
Sixth
Cause of Action for Intentional Interference With Advantageous Business
Relationships
Cross-Defendant contends
that the sixth cause of action for intentional interference with advantageous
business relationships is deficient because Cross-Defendant is a party to the
contract and so cannot as a matter of law interfere with his own contract
beyond a breach. Cross-Complainant contends that courts of other jurisdictions
have held that a party to a multilateral contract may be held liable in tort
for intentionally interfering with the business relationships between
co-parties.
Existing law is based on the
reasoning that interference with one’s own contract is really a breach of
contract by the party alleged to have interfered. See generally Woods v. Fox Broadcasting Sub., Inc.
(2005) 129 Cal. App. 4th 344, 350 (as to intentional or negligent interference
with contracts or prospective economic advantage, a party to the plaintiff's
contract cannot be liable as a defendant, but instead the prescribed cause of
action is for breach of contract); Kasparian
v. County of L.A. (1995) 38 Cal. App. 4th 242, 265 (a party to a
prospective economic advantage cannot be liable in conspiracy for interfering
with the performance of the advantage); Asahi
Kasei Pharma Corporation v. Actelion Ltd. (2013) 222 Cal.App.4th 945,
963-64 (“ ‘[a] stranger’…, means one who
is not a party to the contract or an agent of a party to the contract.”); Popescu v. Apple Inc. (2016) 1 Cal.
App. 5th 39, 51 (analyzing authorities
defining a stranger to a contract in relation to parties having some
insufficient interest in one), disapproved
on other grounds by Ixchel Pharma, LLC v. Biogen, Inc. (2020) 9 Cal.
5th 1130, 1148; Mintz v. Blue Cross
of Cal. (2009) 172 Cal. App. 4th 1594, 1604, 1606, 1607 n. 5 (representatives of contracting parties,
including corporate agents, cannot be liable for intentional or negligent
interference with their principals’ contracts).
The allegations in the
SACC regarding interference are not just based upon a contract between
Cross-Complainant and Cross-Defendant, however, but also contracts that
Cross-Defendant was to enter into with other contracting parties (e.g., SACC, ¶ 2). Thus, a claim for breach
of contract against Cross-Defendant, alone, would not cover all the factual
theories covered in the SACC. Thus, the
Court concludes that the instant allegations are distinguishable in comparison
to existing opinions. The demurrer is overruled as to this claim.
Eighth Cause of Action for Declaratory Relief
Cross-Defendant argues
that the declaratory relief claim is time-barred and duplicative of Cross-Complainant’s
other claims and defenses. “The duration of the limitations period applicable
to a declaratory relief action is determined by the nature of the underlying
obligation sought to be adjudicated.” Snyder
v. Cal. Ins. Guarantee Assoc. (2014) 229 Cal.App.4th 1196, 1208. Cross-Defendant
maintains that the legal malpractice and fraud claims are time-barred so the
related declaratory relief claim is also time-barred. But the Court already
addressed and rejected the statute of limitations period in those claims, and likewise
rejects the limitations argument as to the declaratory relief claim.
A demurrer may be
sustained as to a claim that duplicates another. See, e.g., Holcomb v. Wells Fargo
Bank, NA (2007) 155 Cal.App.4th 490, 501 (negligence allegations
duplicative of negligent misrepresentation); Careau & Co. v.
Security Pac. Bus. Credit, Inc. (1990) 222 Cal.App.3d 1371, 1395, 1400 (breach
of implied covenant was superfluous since it involved same damages as contract
claim). But see Blickman Turkus, LP v. MF Downtown
Sunnyvale, LLC (2008) 162 Cal.App.4th 858, 890 (that a claim is duplicative
is not a ground upon which demurrers may be sustained); Tracfone Wireless, Inc. v. L. A. County
(2008) 163 Cal.App.4th 1359, 1368 (if one cause of action of a complaint,
restating duplicative causes of action, is good as against a general demurrer,
then all of them will stand); Boschma
v. Home Loan Center, Inc. (2011) 198
Cal.App.4th 230, 253 n. 12 (claims for
fraud and unfair business practices were not subject to demurrer where separate
remedies exist for fraud and under Business and Professions Code Section
17200).
The “availability of
another form of relief that is adequate will usually justify refusal to grant
declaratory relief” but “[t]he refusal to exercise the power is within the
court's legal discretion….” Cal. Ins.
Guar. Ass'n v. Sup. Ct. (1991) 231 Cal. App. 3d 1617, 1624. See also Osseous Technologies of Amer., Inc. v.
DiscoveryOrtho Partners LLC (2010) 191 Cal.App.4th 357, 364 (judges lack discretion to dismiss claims for
declaratory relief where complaints are sufficiently alleged and reveal that
the relief is entirely appropriate); Ibid. ("'The mere circumstance that another remedy is available is an
insufficient ground for refusing declaratory relief, and doubts regarding the
propriety of an action for declaratory relief ... generally are resolved in
favor of granting relief.'” ); Pellegrini
v. Weiss (2008) 165 Cal.App.4th 515, 529 (“The question whether declaratory
relief is appropriate in a given case is addressed to the trial court’s
discretion.”); Hood v. Sup. Ct.
(1995) 33 Cal. App. 4th 319, 324 (declaratory relief unavailable where
duplicates other cause of action); C.J.L.
Constr. v. Universal Plumbing (1993) 18 Cal. App. 4th 376, 390 (declaratory
relief may be improper where main action would be substantially same as cross-complaint, or claim already accrued and
the only question for determination is liability for damages).
In light of such law, the
Court exercises its discretion to allow the declaratory relief claim because
the claim elements differ from the other claims in the SACC. Moreover, the instant claim is broadly worded
to include a wide span of factual allegations that the other claims have not
covered.
Ninth,
Tenth, and Eleventh Causes of Action for Implied Indemnity, Comparative
Indemnity, and Specific Equitable Indemnity
Cross-Defendant contends
that these claims are barred by the statute of limitations and fail to state a
claim due to failure to allege joint tortfeasors. The Court rejects the limitations
argument, for the reasons stated above.
As for alleging joint
tortfeasors, it is usually a requirement for indemnity, but as to contract
breach, indemnity can be authorized against a party causing the breach. See
Fremont Reorganizing Corp. v. Faigin (2011) 198 Cal.App.4th 1153, 1177(“A right of
equitable indemnity can arise only if the prospective indemnitor and indemnitee
are mutually liable to another person for the same injury.”); Leko v. Cornerstone Building Inspection
Service (2001) 86 Cal.App.4th 1109, 1115 (requiring tortfeasors
causing injury, jointly and severally liable, but not any duty owed); BFGC Architects Planners, Inc. v.
Forcum/Mackey Construction, Inc. (2004) 119 Cal. App. 4th 848, 852
(equitable indemnity “applies only among defendants who are jointly and
severally liable to the plaintiff.”); Stop
Loss Ins. Brokers, Inc. v. Brown & Toland Medical Group (2006) 143 Cal.
App. 4th 1036, 1040 (“equitable indemnity is only available among tortfeasors
who are jointly and severally liable for the plaintiff's injury…. In addition, implied contractual indemnity
between the indemnitor and the indemnitee can provide a basis for equitable
indemnity.”); Weseloh Family Ltd.
Partnership v. K.L. Wessel Construction Co., Inc. (2004) 125 Cal. App. 4th
152, 175 (there must be some basis for tort liability against an indemnitor,
which generally is based upon a duty owed to the plaintiff, although other
theories may apply, including vicarious or strict liability); Considine Co. v. Shadle (1986) 187
Cal. App. 3d 760, 769 (“A defendant sued for breach of contract may have a
right of implied indemnity against a third person whose wrong caused the
defendant's breach.”).
The SACC sufficiently
alleges that other actions allege that Cross-Complainant is liable for damages but
actually Cross-Defendant is liable including for breaches alleged by others (e.g., SACC, ¶¶ 87 (“Cross Defendants, and
each of them, was the proximate cause of the damages and/or losses….”), 89, 90, 91-96).
Therefore, the demurrer
is overruled as to these claims.
Conclusion
For the reasons stated
herein, the demurrer is overruled.