Judge: Armen Tamzarian, Case: 22STCV37866, Date: 2023-09-01 Tentative Ruling

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Case Number: 22STCV37866    Hearing Date: April 17, 2024    Dept: 52

Cross-Defendant Gohar Tsilikyan’s Demurrer and Motion to Strike Portions of First Amended Cross-Complaint

Requests for Judicial Notice

Cross-complainants Narek Eric Kazarian and Spectrum Lending, LLC (Spectrum) request judicial notice of 12 documents.  The documents may be subject to judicial notice under Evidence Code § 452(d), but they are not relevant or necessary to the court’s analysis.  (See Jordache Enterprises, Inc. v. Brobeck, Phleger & Harrison (1998) 18 Cal.4th 739, 748, fn. 6; Appel v. Superior Court (2013) 214 Cal.App.4th 329, 342, fn. 6.)     All requests for judicial notice are denied.

Demurrer

Cross-defendant Gohar Tsilikyan, trustee of the Gohar Tsilikyan Living Trust Dated May 1, 2018, demurs to numerous causes of action alleged by cross-complainants Narek Eric Kazarian and Spectrum Lending, LLC.

Kazarian’s Claims

Tsilikyan demurs to all causes of action by Kazarian on the basis that he is not the real party in interest and has not alleged he suffered any damages.  In general, the law recognizes “separation between an individual and a business entity.”  (Curci Investments, LLC v. Baldwin (2017) 14 Cal.App.5th 214, 221.)  There are exceptions, but they typically apply when a third party seeks to hold the individual liable for the business entity’s obligations.  “[A]n incorporator should be precluded from ignoring his own deliberately chosen corporate form.”  (In re Marriage of Imperato (1975) 45 Cal.App.3d 432, 439.)  “[A] sole stockholder is estopped to deny the validity of his own corporation.”  (Id. at p. 439, fn. 9.)

Kazarian does not allege sufficient facts for any cause of action.  The entire first amended cross-complaint arises from a $500,000 loan by Spectrum Lending, LLC to Tsilikyan.  The first amended cross-complaint alleges, “Cross-Complainant Spectrum is the lending entity and Cross-Complainant Mr. Kazarian is Spectrum’s Principal.”  (FACC, p. 2.)  Being the corporation’s principal does not mean Kazarian can sue as an individual to recover money owed to the limited liability company.

2. Breach of Implied Covenant of Good Faith and Fair Dealing

            Spectrum alleges sufficient facts for this cause of action.  “Every contract imposes on each party a duty of good faith and fair dealing in contract performance and enforcement such that neither party may do anything to deprive the other party of the benefits of the contract.” (Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th 49, 76.)  “If the allegations” constituting breach of the implied covenant “do not go beyond the statement of a mere contract breach and, relying on the same alleged acts, simply seek the same damages or other relief already claimed in a companion contract cause of action, they may be disregarded as superfluous as no additional claim is actually stated.”  (Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1395; accord Guz v. Bechtel National (2000) 24 Cal.4th 317, 352.)

            The second cause of action alleges Tsilikyan “is fraudulently and falsely claiming [he] never received the loan funds” and “is attempting to void the DOT and Promissory Note.”  (FACC, p. 2.)  The contract does not expressly prohibit the borrower from claiming he did not receive the loan.  This allegation goes beyond the contract’s express terms and interferes with Spectrum’s ability to receive the benefits of the contract.

3. “Unjust Enrichment and Restitution”

The third cause of action fails because unjust enrichment and restitution are not causes of action.  “California does not recognize a cause of action for unjust enrichment.”  (Hooked Media Group, Inc. v. Apple Inc. (2020) 55 Cal.App.5th 323, 336; accord Everett v. Mountains Recreation & Conservation Authority (2015) 239 Cal.App.4th 541, 553.)  “[R]estitution is a remedy and not a freestanding cause of action.”  (Reid v. City of San Diego (2018) 24 Cal.App.5th 343, 362.)

4. “Fraud and Deceit - Intentional Misrepresentation”

            Spectrum alleges sufficient facts for this cause of action.  Intentional misrepresentation requires: “(a) misrepresentation; (b) defendant’s knowledge of the statement’s falsity; (c) intent to defraud (i.e., to induce action in reliance on the misrepresentation); (d) justifiable reliance; and (e) resulting damage.”  (Hunter v. Up-Right, Inc. (1993) 6 Cal.4th 1174, 1184.) 

Spectrum alleges facts constituting promissory fraud, a form of intentional misrepresentation.  “The elements of promissory fraud … are: (1) a promise made regarding a material fact without any intention of performing it; (2) the existence of the intent not to perform at the time the promise was made; (3) intent to deceive or induce the promisee to enter into a transaction; (4) reasonable reliance by the promisee; (5) nonperformance by the party making the promise; and (6) resulting damage to the promisee.”  (Behnke v. State Farm General Ins. Co. (2011) 196 Cal.App.4th 1443, 1453.) 

The first amended cross-complaint alleges sufficient facts for each element.  It alleges Tsilikyan falsely promised to repay a $500,000 loan (FACC, ¶ 32) and “would seek reconveyance of the DOT only after [he] paid back the loan.”  (¶32.d.)  It further alleges Tsilikyan “never intended to pay that loan back” and defaulted on the loan.  (¶ 33.b.)  It alleges he made false promises “with the intention to … induce Cross-Complainants to act in reliance” by lending the money.  (¶ 34.)  The first amended cross-complaint further alleges, “In reliance on these representations, Cross-Complainants were induced to and did execute the Promissory Note secured by the DOT and deliver the $500,000 loan funds to Mr. Tsilikyan.”  (¶ 35.)  Finally, it alleges, “Had Cross-Complainants known the actual facts, Cross-Complainants would not have taken such action by lending $500,000.00 to Cross-Complainants, or entering into the Promissory Note secured by the DOT.”  (Ibid.) 

5. “Fraud and Deceit - Negligent Misrepresentation”

Cross-complainants fail to allege sufficient facts for this cause of action.  “To be actionable, a negligent misrepresentation must ordinarily be as to past or existing material facts.  ‘[P]redictions as to future events, or statements as to future action by some third party, are deemed opinions, and not actionable fraud.’ ”  (Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 158.)  There is no cause of action for a “negligent false promise.”  (Id. at p. 159.)  The only allegedly negligent misrepresentations are that Tsilikyan made false representations that he would comply with the terms of the loan agreement.  (FACC, ¶ 39.)  Those are, at most, false promises.

6. “Fraud and Deceit – Promise Made Without Intention to Perform”

Spectrum alleges sufficient facts for this cause of action for the same reasons as the fourth cause of action.

7. Injunctive Relief

The seventh cause of action fails because “[i]njunctive relief is a remedy, not a cause of action.”  (Allen v. City of Sacramento (2015) 234 Cal.App.4th 41, 65.) 

8. Declaratory Relief

The first amended cross-complaint does not allege sufficient facts for declaratory relief.  Declaratory relief “operates prospectively” and is not proper “where there is an accrued cause of action for an actual breach of contract or other wrongful act.”  (Baldwin v. Marina City Properties, Inc. (1978) 79 Cal.App.3d 393, 407.)  A claim for declaratory relief does not lie when “ ‘the rights of the complaining party have crystallized into a cause of action for past wrongs,’ [citation] [and] a money judgment will fully resolve the dispute… .”  (Cardellini v. Casey (1986) 181 Cal.App.3d 389, 396.)  When the “issues invoked in” a cause of action for declaratory relief “already [are] fully engaged by other causes of action,” “declaratory relief [is] unnecessary and superfluous.”  (Hood v. Superior Court (1995) 33 Cal.App.4th 319, 324.)

The first amended cross-complaint alleges a controversy “concerning [the parties’] respective rights and duties under the DOT and the Promissory Note”  (FACC, ¶ 63) and a dispute over whether they “are valid and enforceable” (¶ 64).  The parties have already sued each other for violating the DOT and promissory note.  Their rights and duties and the validity of the DOT and promissory note are fully engaged by the other causes of action.  A money judgment would suffice to resolve the dispute between the parties.  Declaratory relief is unnecessary. 

Motion to Strike

Cross-defendant Gohar Tsilikyan, trustee of the Gohar Tsilikyan Living Trust Dated May 1, 2018, moves to strike eight portions of the first amended cross-complaint by Narek Eric Kazarian and Spectrum Lending, LLC.  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

The first amended cross-complaint 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.)  The first amended cross-complaint alleges sufficient facts for promissory fraud, which also meets the standard of fraud under Civil Code section 3294.   

B. Special Damages

The first amended cross-complaint does not allege sufficient facts to recover special damages.  “Contractual damages are of two types—general damages (sometimes called direct damages) and special damages (sometimes called consequential damages).”  (Lewis Jorge Construction Management, Inc. v. Pomona Unified School Dist. (2004) 34 Cal.4th 960, 968.)  “Unlike general damages, special damages are those losses that do not arise directly and inevitably from any similar breach of any similar agreement.  Instead, they are secondary or derivative losses arising from circumstances that are particular to the contract or to the parties.  Special damages are recoverable if the special or particular circumstances from which they arise were actually communicated to or known by the breaching party (a subjective test) or were matters of which the breaching party should have been aware at the time of contracting (an objective test).”  (Id. at pp. 968-969.) 

“A defendant cannot be presumed to be aware of the special damage resulting from his act, and therefore, in order to prevent a surprise on him, this sort of damage must be specially set forth in the complaint, or the plaintiff will not be permitted to give evidence of it.”  (Shook v. Pearson (1950) 99 Cal.App.2d 348, 351.)  “The facts as to special damages must be stated with particularity.  The amount of such damages must be stated with particularity.  The amount of such damages must be given, and the means of occasioning them must be set forth.  When such damages depend on proof of different circumstances from the general damages, the grounds of each claim should be alleged.”  (Id. at p. 352.)

The first amended cross-complaint prays “For special damages in amounts according to proof” (FACC, prayer, ¶ 2) without identifying the nature of the special damages, the amount, or the basis for them.  Cross-complainants’ opposition makes no argument about special damages.

C. “Judicial Determination”

            The first amended cross-complaint does not allege a basis for the following portion of the prayer for relief: “A judicial determination that the DOT and Agreement are valid and enforceable.”  (FACC, prayer, ¶ 6.)  This echoes the eighth cause of action for declaratory relief and is superfluous for the same reason.

D. Restitution and Disgorgement of Profits

            The first amended cross-complaint alleges sufficient facts for this form of relief.  Restitution is not a cause of action.  But it is a remedy.  The first amended cross-complaint alleges cross-complainants lent Tsilikyan $500,000, and she refuses to repay it.  That is a basis for restitution and disgorgement of the $500,000.

Disposition

Cross-defendant Gohar Tsilikyan, trustee of the Gohar Tsilikyan Living Trust Dated May 1, 2018’s demurrer to the entire first amended cross-complaint by Narek Eric Kazarian is sustained with 20 days’ leave to amend.  The demurrer to the first amended cross-complaint’s third, fifth, seventh, and eighth causes of action by Spectrum Lending, LLC is sustained with 20 days’ leave to amend.  The demurrer to the first amended cross-complaint’s second, fourth, and sixth causes of action by Spectrum Lending, LLC is overruled.

Cross-defendant Gohar Tsilikyan, trustee of the Gohar Tsilikyan Living Trust Dated May 1, 2018’s motion to strike portions of the first amended cross-complaint is granted in part with 20 days’ leave to amend.  The court hereby strikes the following portions of the first amended cross-complaint: (1) “For special damages in amounts according to proof” (page 18, prayer, ¶ 2); and (2) “A judicial determination that the DOT and Agreement are valid and enforceable” (page 19, prayer, ¶ 6).