Judge: Armen Tamzarian, Case: 22STCV37866, Date: 2023-04-24 Tentative Ruling

Case Number: 22STCV37866    Hearing Date: April 24, 2023    Dept: 52

Tentative Ruling:

            Defendants Narek Eric Kazarian and Spectrum Lending, LLC’s Demurrer and Motion to Strike Portions of Complaint

Demurrer

Defendants Narek Eric Kazarian and Spectrum Lending, LLC demur to all six causes of action alleged by plaintiff Gohar Tsilikyan, trustee of the Gohar Tsilikyan Living Trust Dated May 1, 2018.

A. The Deed

            Defendants argue that all six causes of action fail because the exhibit attached to the complaint contradicts the allegation that defendants did not pay the money they agreed to pay plaintiff.  “Facts appearing in attached exhibits control over contradictory factual allegations in operative complaint.”  (Kalnoki v. First American Trustee Servicing Solutions, LLC (2017) 8 Cal.App.5th 23, 39.) 

            Defendants’ argument relies on a fundamental misinterpretation (or mischaracterization) of the deed of trust attached as exhibit 1 to the complaint.  The complaint alleges defendants agreed to lend plaintiff $500,000 but never did.  (Comp., ¶ 10.)  Defendants argue the deed “states unequivocally that ‘The undersigned [Plaintiff] is the legal owner and holder of all indebtedness secured by the within Deed of Trust [i.e., the $500,000].  All sums secured by said Deed of Trust [i.e., the $500,000] have been fully paid and satisfied.’ (See Complaint, Exhibit 1, page 5.)”  (Demurrer, p. 6.) 

That language from the deed appears under the heading “Request for Reconveyance.”  (Comp., Ex. 1, p. 5.)  It provides, in full, “To: [blank], Trustee [¶] The undersigned is the legal owner and holder of all indebtedness secured by the within Deed of Trust.  All sums secured by said Deed of Trust have been fully paid and satisfied; and you are hereby requested and directed, on payment to you of any sums owing to you under the terms of said Deed of Trust, to cancel all evidences of indebtedness, secured by said Deed of Trust delivered to you herewith together with said Deed of Trust, and to reconvey, without warranty, to the parties designated by the terms of said Deed of Trust, the estate now held by you under the same.”  (Ibid.)

This provision clearly does not say plaintiff received the $500,000 from defendants.  It says plaintiff paid back the debt.  That is why it asks the trustee “to cancel all evidences of indebtedness” and “to reconvey” the property. 

B. Fraud Claims

            Defendants demur to the second through fourth causes of action for intentional misrepresentation, negligent misrepresentation, and promise made without intent to perform.  The complaint alleges sufficient facts for these causese of action.

Intentional misrepresentation requires: (1) a misrepresentation of fact; (2) knowledge of falsity; (3) an intent to defraud; (4) justifiable reliance; and (5) damages.  (Ryder v. Lightstorm Entertainment, Inc. (2016) 246 Cal.App.4th 1064, 1079.) 

Negligent misrepresentation requires “ ‘(1) the misrepresentation of a past or existing material fact, (2) without reasonable ground for believing it to be true, (3) with intent to induce another's reliance on the fact misrepresented, (4) justifiable reliance on the misrepresentation, and (5) resulting damage.’ ”  (Wells Fargo Bank, N.A. v. FSI, Financial Solutions, Inc. (2011) 196 Cal.App.4th 1559, 1573.) 

Promissory fraud requires “(1) the defendant made a representation of intent to perform some future action, i.e., the defendant made a promise, and (2) the defendant did not really have that intent at the time that the promise was made, i.e., the promise was false.”  (Beckwith v. Dahl (2012) 205 Cal.App.4th 1039, 1060.)     

These are all forms of fraud.  “[F]raud must be pled specifically” by “pleading facts which show how, when, where, to whom, and by what means the representations were tendered.”  (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645, internal quotes omitted.) 

The complaint sufficiently alleges the ultimate facts for each element of each cause of action.  First, it alleges, “Defendant KAZARIAN made the following oral representations to the Plaintiff TSILIKYAN on behalf of Defendant SPECTRUM: Defendant SPECTRUM would lend TSILIKYAN $500,000.00 secured by a Deed of Trust against TSILIKYAN’s PROPERTY.”  (Comp., ¶¶ 13, 20, 28.)  That allegation constitutes the ultimate fact of making a representation.  Second, the complaint alleges the representations were false because defendants never lent plaintiff the $500,000.  (Comp., ¶¶ 14, 21.) 

For promissory fraud, “the falsity of that promise is sufficiently pled with a general allegation the promise was made without an intention of performance.  [Citation.]  ‘The representation (implied) is that of the intention to perform [citation]; the truth is the lack of that intention.  Purely evidentiary matters—usually circumstantial evidence or admissions showing lack of that intention—should not be pleaded.  Hence, the only necessary averment is the general statement that the promise was made without the intention to perform it, or that the defendant did not intend to perform it.’ ” (Beckwith v. Dahl (2012) 205 Cal.App.4th 1039, 1060.)  The complaint makes the required allegation: “At the time Defendants made the promise to Plaintiff, Defendants had no intention of performing it.”  (Comp., ¶ 29.)

Next, the complaint sufficiently alleges defendants intended to induce plaintiff’s reliance.  “[T]he only intent by a defendant necessary to prove a case of fraud is the intent to induce reliance.  Moreover, liability is affixed not only where the plaintiff’s reliance is intended by the defendant but also where it is reasonably expected to occur.”  (Lovejoy v. AT&T Corp. (2001) 92 Cal.App.4th 85, 93.)  “It may be inferred that [defendant] concealed [a material fact] with fraudulent intent, for the purpose of making a profit; it may also be inferred that plaintiff, who was unaware of the [fact], would have acted differently had he known of the suppressed fact.”  (Lovejoy, supra, 92 Cal.App.4th at p. 96.)  The reasonable inference is that defendants falsely representing they would lend plaintiff money was done for the purpose of acquiring the deed of trust.  One would reasonably expect reliance on that representation or promise.  That was the point of making it.

The complaint adequately alleges justifiable reliance on defendants’ misrepresentation or promise.  “[T]he reasonableness of the reliance is ordinarily a question of fact.  [Citations.]  However, whether a party’s reliance was justified may be decided as a matter of law if reasonable minds can come to only one conclusion based on the facts.”  (Guido v. Koopman (1991) 1 Cal.App.4th 837, 843.)  The complaint alleges plaintiff’s reliance was reasonable “because Kazarian was a licensed California real estate salesperson with a mortgage loan originator license endorsement.”  (Comp., ¶¶ 16, 24.)  Nothing in the complaint makes it so that all reasonable minds would conclude plaintiff’s reliance was unreasonable.  That is a question of fact that cannot be resolved on demurrer.

Finally, the complaint adequately alleges resulting damages.  As a result of the misrepresentation and false promise, plaintiff executed a deed of trust giving Spectrum Lending, LLC an interest in the subject property.  (Comp., ¶¶ 7, 16, 24, 31.)  As discussed above, plaintiff alleges defendants never funded the $500,000 loan.  Plaintiff therefore lost equity in the subject property without getting the $500,000 defendants promised.  That constitutes damage resulting from plaintiff’s reliance on the alleged misrepresentation or false promise.

Defendants also argue the complaint does not allege the required factual details.  They contend, “There are no facts alleged regarding the ‘who, what, where, and how’.  Who specifically did Defendants make misrepresentations to?  When precisely were they made?  Were they in writing or verbal?  The Complaint alleges no specifics.”  (Demurrer, p. 8.)

The complaint expressly alleges those specific details.  “On or about October 23, 2020, at 1915 W. Glenoaks Boulevard, Suite 101, Glendale, Los Angeles County, California, 91201, Defendant KAZARIAN made the following oral representations to the Plaintiff TSILIKYAN on behalf of Defendant SPECTRUM: Defendant SPECTRUM would lend TSILIKYAN $500,000.00 secured by a Deed of Trust against TSILIKYAN’s PROPERTY.”  (Comp., ¶¶ 13, 20, 28.)  The complaint thus alleges defendant Kazarian made the representations to plaintiff Tsilikyan.  He did so on or about October 23, 2020.  He made them orally.

Motion to Strike

            Defendants move to strike nine portions of plaintiff’s complaint regarding punitive damages and attorney fees.  Courts may strike “irrelevant matter” (CCP § 436(a)), including “[a] demand for judgment requesting relief not supported by the allegations of the complaint” (CCP § 431.10(b)(3)). 

A. Punitive Damages

Plaintiff alleges sufficient facts to recover punitive damages.  Courts may strike allegations related to punitive damages where the facts alleged “do not rise to the level of malice, oppression or fraud necessary” to recover punitive damages under Civil Code section 3294.  (Turman v. Turning Point of Central California, Inc. (2010) 191 Cal.App.4th 53, 64.) 

As discussed above, the complaint specifically alleges defendants defrauded plaintiff.  The allegations that defendants induced plaintiff to sign a deed of trust but did not fund the promised $500,000 loan suffice for fraud or malice. 

B. Attorney Fees

Plaintiff alleges a valid basis for recovering attorney fees.  A plaintiff can only recover attorney fees when authorized by contract, statute, or law.  (CCP § 1033.5(a)(10).)  The deed of trust provides that plaintiff trustor agrees “[t]o appear in and defend any action or proceeding purporting to affect the security hereof or affect the security hereof or the rights or powers of Beneficiary or Trustee; and to pay all costs and expenses, including cost of evidence of title and attorney’s fees in a reasonable sum, in any such action or proceeding in which Beneficiary or Trustee may appear.”  (Comp., Ex. 1, p. 4, ¶ 3.)  The provision applies to this case because it is an action purporting to affect the beneficiary or trustee’s security, rights, or powers. 

Though this language provides only for paying attorney fees in one direction—from trustor to the trustee or beneficiary—Civil Code section 1717 makes the fee provision reciprocal.  “In any action on a contract, where the contract specifically provides that attorney’s fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney's fees in addition to other costs.”  (Civ. Code, § 1717(a); see Scott Co. of California v. Blount, Inc. (1999) 20 Cal.4th 1103, 1109 [“Section 1717, however, renders the provision mutual, giving either plaintiff or defendant, if a prevailing party, a right to attorney fees on any claims based on the contract”].)

Disposition

Defendants Narek Eric Kazarian and Spectrum Lending, LLC’s demurrer is overruled.  Defendants Narek Eric Kazarian and Spectrum Lending, LLC’s motion to strike is denied.  Defendants are ordered to answer within 20 days.