Judge: Anne Richardson, Case: 21STCV12559, Date: 2023-03-09 Tentative Ruling

Case Number: 21STCV12559    Hearing Date: March 9, 2023    Dept: 40

Superior Court of California

County of Los Angeles

Department 40

Background and Procedural History

Allegations

On or about January 2005, Defendants Atlantic Park Plaza, LLC, and its managing members, Yehezkel Hezi Kashanian and Javid Somekh solicited Plaintiffs Mehran Haghani and Khanoum Agha Akhavan (briefed by the opposition as mother and son) to jointly invest with Defendants in a property located at 9923 Atlantic Avenue, South Gate, California (the “Subject Property”). Defendants represented to Plaintiffs that Defendants would convert the Subject Property into a 70,000 square-foot shopping center. (Defendants only ultimately built a 40,000 square-foot shopping center.) On or about April 15, 2005, Plaintiffs and Defendant Atlantic became the owners as tenants-in-common of the Property, with Plaintiffs jointly owning 26% of the Subject Property and Defendant Atlantic owning the remaining 74% interest. The purchase price of the Subject Property was $4,819,117.63 with Plaintiffs contributing $1,252,970 of the purchase price and $500,000 towards renovating the property, for a total investment of $1,752,970 from Plaintiffs.

On or about April 2007, Defendants Kashanian and Somekh told the Plaintiffs that the Defendants were desperately in need of capital and pleaded with the Plaintiffs to temporarily transfer all their ownership interest in the property to Defendant Atlantic, so that the Defendants could offer the property as collateral to a lender in exchange for a loan on the Subject Property, after which the Defendants would transfer back to Plaintiffs their original 26% ownership interest in the Property in a matter of months. The Plaintiffs acceded to the request on or about April 2007 based on the parties’ “years of friendship” and their belonging to “the same tight-knit Persian-Jewish community in Los Angeles.”

Defendants nevertheless failed to convey back to the Plaintiffs their ownership interest in the Subject Property. Further, the Defendants obtained a mortgage on the Subject Property. The Second Amended Complaint alleges that the Defendants ultimately used the loan from the mortgage to purchase for themselves the real property located at 5120 Tweedy Blvd, South Gate, CA 90280.

Plaintiffs Haghani and Akhavan threatened litigation in or around February 8, 2009, prompting a March 5, 2009 informal mediation led by non-attorney intermediaries in the Persian-Jewish community with expertise in the area of real estate. The parties agreed that Defendants would remit $1,500,000 to Plaintiffs over a 36-month period to settle the disputes regarding the Subject Property, with Defendants Kashanian and Somekh personally guaranteeing this payment to Plaintiffs in a short, handwritten agreement also dated March 5, 2009.

Previous versions of the complaint alleged that a formal typewritten agreement concerning the same issues was drafted by an attorney hired by the Defendants, with the typewritten document attached as an exhibit to those prior pleadings and dated March 5, 2009 but containing no signatures from the parties.

Despite the parties’ agreement, the Defendants failed to pay the Plaintiffs any portion of the $1.5 million, instead repeatedly requesting extensions of time to pay Plaintiffs Haghani and Akhavan. In or around June of 2012, the Property was sold by Defendants to South Gate Tweety, LLC for $3.01 million.

Before and after the sale, the Plaintiffs and Defendants participated in approximately two-dozen face-to-face meetings and telephone calls with mutual friends and respected non-attorney intermediaries in the Persian-Jewish community, at which the Defendants reaffirmed the promise that they intended to perform under the March 5, 2009 agreement. However, no performance was forthcoming. A subsequent informal mediation was held on or about August 21, 2019, at which the Defendants again reaffirmed their promise to pay the Plaintiffs pursuant to their agreement and pleaded that Plaintiffs not sue, warning that a lawsuit would only hinder the Defendants ability to pay the Plaintiffs.

The last informal mediation between the parties appears to have been held on November 11, 2020. (The Complaint, FAC, and SAC all allege that this final mediation took place on November 11, 2021, but, given the fact that the Complaint was filed on April 1, 2021, the November 11, 2021 date alleged in all three pleadings appears to be a typographical error. For the purposes of this Motion, the Court will assume the date was in 2020.) At this final informal mediation, Defendants for the first time indicated that they would not pay the monies called for in the agreement, and that despite their previous promises to honor the March 5, 2009 agreement, the Plaintiffs were no longer entitled to enforce the agreement on the basis that any claims would be barred by statute of limitations.

Procedural History

On April 21, 2021, Plaintiffs Haghani and Akhavan sued Defendants Atlantic Plaza, Kashanian, and Somekh pursuant to claims of (1) breach of contract, (2) breach of personal guaranty, (3) fraud and deceit, (4) negligent misrepresentation, and (5) intentional infliction of emotional distress in relation to (a) Defendants’ promise regarding the size of the shopping mall to be built by the Defendants, (b) Defendants’ promise to return to Plaintiffs their 26% interest in the Subject Property, and (c) Defendants’ promise to pay Plaintiffs under the terms of the March 5, 2009 agreement.

The Defendants filed a general sufficiency demurrer to the Complaint on June 24, 2021, which was mooted prior to its October 6, 2021 hearing through the Plaintiffs’ filing of a First Amended Complaint on September 29, 2021. The FAC pleaded the same factual allegations against the Defendants but omitted the IIED claim made in the original complaint.

On October 21, 2021, the Defendants filed a general sufficiency demurrer to the FAC’s claims, which Plaintiffs Haghani and Akhavan opposed, and which the Court overruled in its entirety on April 19, 2022, ordering the Defendants to file an Answer to the FAC within 45 days.

Instead of so answering the FAC, on May 27, 2022, the Defendants filed a second demurrer to the FAC challenging the first and second causes of action alleged therein on uncertainty and statute of frauds grounds. The Defendants also filed an Answer to the FAC on June 23, 2022.

The Court heard the second demurrer to the FAC on August 25, 2022. (The Plaintiffs had not opposed the second demurrer to the FAC at that time and did not appear at the hearing.) Without indicating which argument it was based on—uncertainty or statute of frauds—the Court sustained the demurrer as to the first and second causes of action pleaded in the FAC. The Court’s order otherwise noted that the uncertainty portion of the second demurrer was not waived despite not being included in the June 24, 2021 demurrer and that Code of Civil Procedure section 430.41 did not prohibit or was silent to the question of whether a new demurrer could be brought against the same pleadings based on new and different grounds as the first demurrer. The Court also gave Plaintiffs Haghani and Akhavan 30 days’ leave to file an opposition to the second demurrer to the FAC on the grounds that it was reasonably possible that Plaintiffs did not oppose the second demurrer because of the lateness or delay in its filing.

Plaintiffs Haghani and Akhavan failed to file an opposition to the second demurrer by September 26, 2022 as directed by the August 25th order. Instead, the Plaintiffs filed their opposition on October 18, 2022, with the Defendants filing a reply on October 26, 2022. As a result, on November 9, 2022, the Court found that Plaintiffs had filed an untimely opposition to the second demurrer to the FAC and confirmed its August 25th order sustaining the second demurrer to the FAC’s first and second causes of action, with leave to amend within ten days.

On November 21, 2022, Plaintiffs Haghani and Akhavan filed a Second Amended Complaint, alleging the five causes of action pleaded in the original complaint—(1) breach of contract, (2) breach of personal guaranty, (3) fraud and deceit, (4) negligent misrepresentation, and (5) IIED—based on largely the same allegations in their prior pleadings, with the exception of references to the typewritten and unsigned agreement between the parties dated March 5, 2009.

On December 14, 2022, Defendants Atlantic Plaza, Kashanian, and Somekh brought the instant demurrer against the entire SAC based on sham pleading, against the SAC’s first two causes of action based on uncertainty and statute of frauds grounds, and against the SAC’s fifth cause of action for adding the IIED claim back into the pleadings without leave of court.

The demurrer is opposed by Plaintiffs Haghani and Akhavan. The Defendants have replied.

Judicial Notice

The Court notes that while the Defendants’ briefing alludes to reasons why the Court should take judicial notice of certain documents or pleadings, the Defendants do not make a proper request in a separate paper attaching the relevant material and establishing the statutory grounds and reasons for such a request. (See, e.g., Demurrer, 5:3-6; Cal. Rules of Court, rule 3.1306(c).)

Demurrer: OVERRULED in Part, SUSTAINED in Part.

Sufficiency Standard [Code Civ. Proc. § 430.10, subd. (e)]

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747; see Code Civ. Proc., § 430.10, subd. (e).) This device can be used only to challenge defects that appear on the face of the pleading under attack or from matters outside the pleading that are judicially noticeable. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) “To survive a [general] demurrer, the complaint need only allege facts sufficient to state a cause of action; each evidentiary fact that might eventually form part of the plaintiff’s proof need not be alleged.” (C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872.) In testing the sufficiency of the cause of action, the demurrer admits the truth of all material facts properly pleaded. (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-67.) A demurrer, however, “does not admit contentions, deductions or conclusions of fact or law.” (Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 713.) When considering demurrers, courts read the allegations liberally and in context. (Taylor v. City of Los Angeles Dept. of Water and Power (2006) 144 Cal.App.4th 1216, 1228, disapproved on other grounds, Jones v. Lodge at Torrey Pines Partnership (2008) 42 Cal.4th 1158, 1162.) The face of the complaint includes exhibits attached to the complaint. (Frantz v. Blackwell (1987) 189 Cal.App.3d 91, 94.) If facts appearing in the exhibits contradict those alleged, the facts in the exhibits take precedence. (Holland v. Morse Diesel Intern., Inc. (2001) 86 Cal.App.4th 1443, 1447.)

Uncertainty Standard [Code Civ. Proc. § 430.10, subd. (f)]

A demurrer to a pleading lies where the pleading is uncertain, ambiguous, or unintelligible. (Code Civ. Proc. § 430.10, subd. (f).) “A demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures.” (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 616.) As a result, a special demurrer for uncertainty is not intended to reach failure to incorporate sufficient facts in the pleading but is directed only at uncertainty existing in the allegations already made. (People v. Taliaferro (1957) 149 Cal.App.2d 822, 825.) Where complaint is sufficient to state a cause of action and to apprise defendant of issues he is to meet, it is not properly subject to a special demurrer for uncertainty. (See ibid.; see also Gressley v. Williams (1961) 193 Cal.App.2d 636, 643 [“[a] special demurrer [for uncertainty] should be overruled where the allegations of the complaint are sufficiently clear to apprise the defendant of the issues which he is to meet”].)

Demurrer to SAC, Sham Pleading: OVERRULED.

“[T]he sham pleading doctrine prevents a plaintiff from attempting to breathe life into a complaint by omitting relevant facts from an amended complaint that made plaintiff’s previous complaint defective.” (Tindell v. Murphy (2018) 22 Cal.App.5th 1239, 1248.) Under the doctrine, “plaintiffs are precluded from amending complaints to omit harmful allegations, without explanation, from previous complaints to avoid attacks raised in demurrers or motions for summary judgment.” (Deveny v. Entropin, Inc. (2006) 139 Cal.App.4th 408, 425.) “[T]he plaintiff must satisfactorily explain such an omission.” (Tindell, supra 22 Cal.App.5th at 1248.) “Failure to provide such an explanation allows the court to disregard the inconsistent allegations and read into the amended complaint the allegations of the superseded complaint.” (Id.; see also Blain v. Doctor’s Co. (1990) 222 Cal.App.3d 1048, 1058 [“For purposes of a demurrer to an amended pleading an unexplained suppression of the original destructive allegation will not, in the words of Lady MacBeth, wash out the ‘damned spot.’”].) The sham pleading doctrine applies to both verified and unverified complaints. (Pierce v. Lyman (1991) 1 Cal.App.4th 1093, 1109.)

Defendants Atlantic Plaza, Kashanian, and Somekh argue that the SAC is a sham pleading because the FAC based the breach of contract and breach of guaranty claims on pleadings and a copy of the typewritten agreement between the parties, dated March 5, 2009, contemplating compensation to the Plaintiffs in the amount of $1.5 million for a release of their interest in the Subject Property, where the typewritten document was unsigned by any of the parties, and therefore violated the statute of frauds. (Demurrer, 3:8-15, 4:2-19; compare FAC, ¶¶ 20-21, Exs. B-C [allegations and copy of the one-page March 5, 2009 handwritten agreement to compensate the Plaintiffs preceding allegations and copy of March 5, 2009 longform typewritten document as to the same agreement but unsigned by the parties], with SAC, ¶ 23, Ex. D [allegations and copy of March 5, 2009 one-page handwritten agreement by the parties without allegations or copy of the typewritten document].) Defendants further argue that this omission makes the SAC a sham pleading because the “Plaintiffs have [now] attempted to avoid the statute of frauds by omitting the Agreement,” for which reason “the Court should take judicial notice of the FAC and sustain Defendant’s demurrer to the SAC.” (Demurrer, 4:2-19.)

In opposition, the Plaintiffs argue that “[i]t was always alleged and understood that the basis for Plaintiffs’ causes of actions of Breach of Contract and Personal Guaranty was the handwritten agreement attached as Exhibit B to the First Amended Complaint and attached as Exhibit D to the SAC” and that “Exhibit C to the First Amended Complaint which was just a type-written version of Exhibit B to the First Amended complaint was omitted from the Second Amended Complaint.” (Opp’n, 8:25-9:2 [pointing to FAC, ¶¶ 20-21].)

In reply, the Defendants argue that the FAC specifically alleged that the March 5, 2009 typewritten document was pleaded as the basis for the agreement between the parties to compensate Plaintiffs in the amount of $1.5 million and that a review of the typewritten agreement at paragraph 13 (FAC, Ex. C) shows that its terms specifically superseded any prior agreement between the parties—i.e., the March 5, 2009 handwritten agreement signed by all the parties. (Demurrer, 2:11-24.)

The Court disagrees with the Defendants. The face of the complaint includes exhibits attached to the complaint. (Frantz v. Blackwell, supra, 189 Cal.App.3d at p. 94.) If facts appearing in the exhibits contradict those alleged, the facts in the exhibits take precedence. (Holland v. Morse Diesel Intern., Inc., supra, 86 Cal.App.4th at p. 1447.) Paragraph 21 of the FAC alleges that the purpose of the typewritten agreement was to memorialize the handwritten and signed agreement between the parties. (FAC, ¶ 21.) Paragraph 29 of the FAC—pleading breach of contract—alleges that the agreement between the parties comprised of a combination of Exhibits B and C to the FAC, i.e., the handwritten agreement signed by the parties on March 5, 2009 and the unsigned typewritten document dated March 5, 2009 meant as a longform of the handwritten agreement. (FAC, ¶ 29 [“In or around March 5, 2009, the parties entered into the Agreement, attached hereto as Exhibit B and C”].) A review of the typewritten agreement shows that it was never signed by the parties, however. (FAC, Ex. C.) If exhibits attached to the FAC supersede allegations made therein (Holland v. Morse Diesel Intern., Inc., supra, at p. 1447), then the FAC is clear in establishing, by way of exhibit, that the typewritten document was never formalized as an agreement between the parties, regardless of whether the FAC’s factual pleadings allege the typewritten document as part—not the whole—of the contract for compensation to the Plaintiffs. As a result, Plaintiff adequately alleges that the handwritten March 5, 2009 agreement between the parties (FAC, Ex. B; SAC, Ex. D) was the underlying basis pleaded in the FAC for the agreement between the parties, wherein the Defendants agreed to compensate the Plaintiffs in the amount of $1.5 million in exchange for Plaintiffs release of their claims to 26% ownership in the Subject Property.

The Defendants’ demurrer to the entire SAC on sham pleading grounds is thus OVERRULED.

Demurrer to COAs 1 & 2, Uncertainty: OVERRULED.

The Defendants next argue that “to the extent Plaintiffs rely upon the handwritten document as the operative contract between the parties, they may not do so because [1] Exhibit B to the FAC … sets forth no new consideration by Plaintiff Haghani for Defendants’ alleged new promise,” (2) “the supposed contract is a jumble of unreadable terms and incomplete sentences that do not evidence a meeting of the minds on any contractual terms,” thus making the SAC’s first two causes of action “ambiguous and uncertain and at worst unintelligible.” (Demurrer, 5:3-9.)

In opposition, Plaintiffs argue that “the SAC alleges in Paragraph 22 [that the] ‘Defendants would pay Plaintiffs $1,500,000 over a 36-month period, in consideration for the 26% interest of the Property that Plaintiffs transferred to Defendants,’” which, alongside paragraphs 2 to 5, 7, 12, 15 to 16, and 20 of the SAC, “alleges with specific detail the charges made against the Defendants” as to survive an uncertainty challenge. (Opp’n, 9:15-10:23.)

In reply, the Defendants argue that (1) the terms of the handwritten agreement take precedence over the allegations of the SAC and show no new consideration was contemplated in the March 5, 2009 agreement between the parties, (2) the March 5, 2009 agreement was alleged as a modification of the purchase agreement for the Subject Property without proper consideration, and (3) any agreement to return to the Plaintiffs their 26% interest in the Subject Property following the 2007 conveyance of this interest from the Plaintiffs to the Defendants is the same legal obligation as the Defendants’ obligation to have conveyed the same 26% interest in the Subject Property to the Plaintiffs when the parties first purchased the Subject Property in 2005, for which no consideration is present in the March 5, 2009 handwritten agreement. (Reply, 3:7-21.)

The Court does not consider the arguments raised by the Defendants for the first time in reply as related to modification and pre-existing legal obligation. (See Nordstrom Com. Cases (2010) 186 Cal.App.4th 576, 583 [courts need not accept arguments raised for the first time on reply absent good cause as to why points were not raised earlier].)

The Court further disagrees with the demurrer’s position that Exhibit D to the SAC supersedes the pleadings in the SAC. While the Defendants properly state the general rule as to exhibits superseding factual pleadings (Holland v. Morse Diesel Intern., Inc., supra, 86 Cal.App.4th at p. 1447), the Court finds that the terms of the handwritten agreement and the SAC’s pleadings are harmonious. (Compare SAC, ¶ 32, with SAC, Ex. D [showing same terms of $1.5 million to be paid over 36 months and interest of 5% from months 19 to 24 and 10% from months 25 to 36].)

Additionally, contrary to Defendants’ argument in the demurrer, the SAC does plead adequate consideration for the March 5, 2009 agreement. The SAC pleads that the Plaintiffs elected to receive $1.5 million in exchange for their promise to release claims to a 26% interest in the Subject Property. (SAC, ¶¶ 21-22.)

Last, the Court finds no merit to the argument that the handwritten agreement is unintelligible where it contains the basic terms of the agreement, as confirmed by the pleadings in the SAC. (SAC, ¶ 32, Ex. D [$1.5 million to be paid over 36 months and interest of 5% from months 19 to 24 and 10% from months 25 to 36].)

The Demurrer as to the first and second causes of action alleged in the SAC based on uncertainty grounds is therefore OVERRULED.

Demurrer to COAs 1 & 2, Statute of Frauds: OVERRULED.

Defendants next demur to the SAC’s first and second causes of action on the grounds that they rely on a contract that violates the statute of frauds—i.e., the unsigned typewritten document between the parties attached as Exhibit C to the FAC, not any agreement pleaded or shown by exhibit in the SAC—because the typewritten agreement was (1) not signed and (2) was not performed within a year of its creation. (Demurrer, 5:10-23.)

In opposition, the Plaintiffs argue that the first and second causes of action do not violate the statute of frauds because they rely on pleadings related to and a copy of the handwritten March 5, 2009 agreement, which is signed by all the parties. (Opp’n, 11:7-12.)

In reply, the Defendants reiterate the points made in the motion. (Reply, 3:1-4.)

The Court finds the Defendants’ position unavailing because the premise of their argument is based on an exhibit attached to a superseded complaint in this action—the typewritten agreement attached the FAC—where (1) the SAC does not include pleadings or a copy as to the typewritten agreement and (2) the Court has found that such omission was not sham pleading by the Plaintiffs.

The Demurrer as to the first and second causes of action alleged in the SAC based on statute of frauds grounds is therefore OVERRULED.

Demurrer to COA 5, Non-Permissible Amendment: SUSTAINED, Without Leave to Amend.

The Defendants last argue that the fifth cause of action pleaded in the SAC—IIED—is an impermissible amendment to the pleadings where the Court’s November 9, 2022 order sustaining the second demurrer to the FAC only granted leave to amend the first and second causes of action. (Demurrer, 5:24-6:7.)

In opposition, the Plaintiffs argue that “[o]n November 9, 2022, the Court granted Plaintiffs’ [sic] leave to amend their First Amended Complaint,” for which reason, “as a part of that amendment, Plaintiffs were within their right to add a fifth cause of action for intentional inflection of emotional distress.” (Opp’n, 11:15-19.)

In reply, the defendants reiterate the points made in their motion, arguing that the Court limited leave to amend as to the first and second causes of action only. (Reply, 4:1-12.)

The Court agrees with the Defendants. Following an order sustaining a demurrer or a motion for judgment on the pleadings with leave to amend, the plaintiff may amend his or her complaint only as authorized by the court’s order. (People ex rel. Dept. Pub. Wks. v. Clausen (1967) 248 Cal.App.2d 770, 785 [leave to amend complaint does not constitute leave to amend to add new defendant].) A new cause of action may be alleged following a sustained demurrer or judgment on the pleadings only when the new claim “directly responds” to the trial court’s reasoning in sustaining a demurrer or motion for judgment on the pleadings. (See Patrick v. Alacer Corp. (2008) 167 Cal.App.4th 995, 1015 [amendment of derivative action against corporation that failed on demurrer to declaratory relief claim in new pleading permitted where demurrer was sustained based on issues related to standing properly raised in the declaratory relief claim].)

Here, the Court’s November 9, 2022 order is clear: The Court “REENTER[ED] its August 25, 2022 Order SUSTAINING the Second Demurrer as to COA 1 and 2 with Leave to Amend.” (11/9/22 Ruling, p. 2.)

The ‘leave to amend’ contemplated by the Plaintiffs—i.e., leave to amend an entire complaint through the court’s discretion—is thus distinguished from the ‘leave to amend’ for demurrer purposes pursuant to Code of Civil Procedure section 430.10—i.e., leave to amend a cause of action against which a successful demurrer has been sustained insofar as amendment allows the plaintiff or cross-complainant to sufficiently plead that claim alone.

The record fails to reflect that the Plaintiffs requested leave to amend the complaint to add new allegations. Further, the Court finds that the new IIED claim was not responsive to any reasons articulated for why the Court sustained the second demurrer to the FAC (Patrick v. Alacer Corp., supra, 167 Cal.App.4th at p. 1015).

The Demurrer as to the second cause of action alleged in the SAC on improper amendment grounds is therefore SUSTAINED, Without Leave to Amend.

Conclusion

Defendants Atlantic Park Plaza, LLC, Yehezkel Hezi Kashanian, and Javid Somekh’s Demurer to Plaintiff’s Second Amended Complaint is:

(1) OVERRULED as to the SAC’s entire complaint as based on sham pleading grounds;

(2) OVERRULED as to the SAC’s first and second causes of action as based on uncertainty and statute of frauds grounds; and

(3) SUSTAINED, Without Leave to Amend, as to the SAC’s fifth cause of action as based on improper amendment grounds.