Judge Bruce G. Iwasaki, Case Number: 23STCV15172, Date: 2024-01-24 Tentative Ruling

This case arises from a landlord-tenant dispute. On June 29, 2023, Plaintiffs Lehrer-Graiwer and Sarah Lehrer-Graiwer (Plaintiffs) filed a Complaint against Defendant Jasmin Shokrian (Defendant).

On July 11, 2023, the Court in Department 53 denied Defendant’s request that this matter be deemed related to LASC Case No. BC685351 (BC Action).

On November 28, 2023, Plaintiffs filed a First Amended Complaint alleging (1.) fraud in the inducement, and (2.) recission based on fraud in the inducement. The FAC alleges that Plaintiffs advertised a rental unit located at 967 Maltman Avenue, Los Angeles, California 90026 (Premises) for short term rental. Defendant completed an “Application to Rent” wherein she represented that she had never been evicted or asked to move. She also represented that she was self-employed as a fashion designer for Jasmin Shokrian Atelier and had an annual gross income of $100,000 per year. Thereafter, Plaintiffs learned that Defendant’s representations were false.

Defendant demurs to the first and second causes of action in the FAC on the grounds that the action is barred by res judicata/collateral estoppel, the FAC fails to state a claim, and the Complaint suffers from uncertainty. Alternatively, Defendant asks the Court to stay this matter pending the appeal in the BC Action.

The demurrer is overruled in its entirety. The motion to strike is granted in part and denied in part. Plaintiffs shall not have leave to amend.

Defendant’s request for judicial notice of Exhibits 1-9 is granted. (Evid. Code, § 452, subd. (d), (h).) Defendant’s reply request for judicial notice of Exhibit 10 is granted. (Evid. Code, § 452, subd. (d).)

Plaintiffs’ request for judicial notice of Exhibit 1-2 is granted. (Evid. Code, § 452, subd. (d).)

A demurrer is an objection to a pleading, the grounds for which are apparent from either the face of the complaint or a matter of which the court may take judicial notice. (Code Civ. Proc., § 430.30, subd. (a); see also Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) The purpose of a demurrer is to challenge the sufficiency of a pleading “by raising questions of law.” (Postley v. Harvey (1984) 153 Cal.App.3d 280, 286.) “In the construction of a pleading, for the purpose of determining its effect, its allegations must be liberally construed, with a view to substantial justice between the parties.” (Code Civ. Proc., § 452.) The court “ ‘ “treat[s] the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law . . ..” ’ ” (Berkley v. Dowds (2007) 152 Cal.App.4th 518, 525.)

Defendant argues that Plaintiffs’ claims are barred by res judicata and collateral estoppel. Defendant argues that the FAC attempts to relitigate new theories based on the same “primary rights” as was adjudicated in the BC Action.

“Courts have at times used “res judicata” as an umbrella term, encompassing both the primary aspect of claim preclusion and the secondary aspect of issue preclusion. We will follow the current practice to use the term “claim preclusion” to describe the primary aspect of the res judicata doctrine and the term “issue preclusion” to denote collateral estoppel.” (Cal Sierra Development, Inc. v. George Reed, Inc. (2017) 14 Cal.App.5th 663, 671.)

“‘Res judicata describes the preclusive effect of a final judgment on the merits.” (Mycogen Corp. v. Monsanto Co. (2002), 28 Cal. 4th 888, 896.) It “prevents relitigation of the same cause of action in a second suit between the same parties or parties in privity with them.” (Id. at p. 897.) Under the doctrine, “all claims based on the same cause of action must be decided in a single suit; if not brought initially, they may not be raised at a later date.” (Ibid.) The following are the prerequisite elements for applying the doctrine of res judicata/claim preclusion to an entire cause of action: (1) A claim raised in the present action is identical to a claim litigated in a prior proceeding; (2) the prior proceeding resulted in a final judgment on the merits; and (3) the party against whom the doctrine is being asserted was a party or in privity with a party to the prior proceeding. (Boeken v. Philip Morris USA, Inc. (2010) 48 Cal. 4th 788, 797.)

“Unless the issue or cause of action in the two actions is identical, the first judgment does not stand as a bar to the second suit. [Citations.] To define a cause of action, California follows the primary right theory.” (Citizens for Open Access to Sand and Tide, Inc. v. Seadrift Ass'n (1998) 60 Cal.App.4th 1053, 1067.)

The primary right theory “ ‘provides that a “cause of action” is comprised of a “primary right” of the plaintiff, a corresponding “primary duty” of the defendant, and a wrongful act by the defendant constituting a breach of that duty. [Citation.] The most salient characteristic of a primary right is that it is indivisible: the violation of a single primary right gives rise to but a single cause of action.’ ” (Mycogen Corp. v. Monsanto Co., supra, 28 Cal.4th at 904.) The primary right at issue must be “ ‘distinguished from the legal theory on which liability for that injury is premised: “Even where there are multiple legal theories upon which recovery might be predicated, one injury gives rise to only one claim for relief.” [Citation.] The primary right must also be distinguished from the remedy sought: “The violation of one primary right constitutes a single cause of action, though it may entitle the injured party to many forms of relief, and the relief is not to be confounded with the cause of action, one not being determinative of the other.” ’ ” (Ibid.)

The doctrine of collateral estoppel bars the party to a prior action from relitigating any issues finally decided against him or her in the earlier action. (City of Sacramento v. State of California (1990) 50 Cal.3d 51, 64.) The doctrine of collateral estoppel applies: “(1) after final adjudication (2) of an identical issue (3) actually litigated and necessarily decided in the first suit and (4) asserted against one who was a party in the first suit or one in privity with that party.” (DKN Holdings LLC v. Faerber (2015) 61 Cal.4th 813, 825.)

The “ ‘identical issue requirement’ concerns whether ‘identical factual allegations' are at stake in the two proceedings....” (Lucido v. Superior Court (1990) 51 Cal.3d 335, 342.) An issue is actually litigated ‘[w]hen [it] is properly raised, by the pleadings or otherwise, and is submitted for determination, and is determined .... A determination may be based on a failure of ... proof ....’ [Citation.]” (People v. Sims (1982) 32 Cal.3d 468, 484.)

Under either doctrine, Defendant must show either the identical claim or the identical issue was previously litigated. Defendant fails to do so here.

In BC Action, the same plaintiffs, Jonathan Lehrer-Graiwer and Sarah Lehrer-Graiwer, filed a Complaint for breach of lease based on unpaid rental amounts and Defendant’s refusal to vacate the premises within the time required under the lease. (Def.’s RJN Ex. 1 [BC685351 Complaint], ¶¶ 6-12.) The Complaint in BC Action also alleges a fraud in the inducement claim based on the same allegations of Defendant’s promise to vacate the Property upon 60 days’ notice. (Def.’s RJN Ex. 1 [BC685351 Complaint], ¶¶ 16-18.)

In this action, the FAC alleges fraud in the inducement based on representations made in Defendant’s rental application. (FAC ¶¶ 8-20, 22.) Plaintiffs also seek to rescind the Lease based on these fraudulent representations. (FAC ¶¶ 33-38.)

Based on the allegations in the pleadings in these two cases, the two actions do not contain the same causes of action or issues. That is, the BC Action contains claims for contractual breaches arising from the lease and the fraud related to those specific contractual breaches. In contrast, the instant action contains claims for fraudulent misrepresentations arising from Defendant’s application to rent the Premises. These cases are based on different underlying facts and the resulting claims pertain to distinct wrongful acts and injuries.

Additionally, under both doctrines, there is a finality requirement with respect to the adjudication of the claims or issues. Here, Defendant’s own demurrer concedes that the BC Action is not yet final. (Dem., 13:15-14:3 [“Plaintiffs’ Case Should be Stayed Pending the Appeal of the Related Action”]; see also Def.’s RJN Exs. 7-8.)

Further, the Court declines to stay this action pending the appeal in the BC Action. Code of Civil Procedure section 916 does not stay this action and the Court declines to exercise its inherent authority to stay this matter under Code of Civil Procedure section 128 where there is no overwhelming degree of overlap or any other grounds that justifies a stay here.

Defendant also demurs to the first cause of action for fraud in the inducement and second cause of action for rescission based on this fraud on the grounds the claims lack specificity.

The elements of fraud 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. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.) “Fraud in the inducement is a subset of the tort of fraud.” (Hinesley v. Oakshade Town Center (2005) 135 Cal.App.4th 289, 294.) It “occurs when ‘ “the promisor knows what he is signing but his consent is induced by fraud, mutual assent is present and a contract is formed, which, by reason of the fraud, is voidable.” ’ ” (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 415 [quoting Ford v. Shearson Lehman American Express, Inc. (1986) 180 Cal.App.3d 1011, 1028].)

Further, “fraud must be pleaded specifically; general and conclusory allegations do not suffice.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.) “This particularity requirement necessitates pleading facts which show how, where, to whom, and by what means” the alleged fraud occurred. (Id.) The purpose of the particularity requirement is to “separate meritorious and nonmeritorious cases, if possible in advance of trial.” (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184.)

Defendant argues that the FAC is “vague, ambiguous and unclear as to who did what when and does not address Defendant’s alleged scienter . . ..” (Dem., 13:3-4.) This argument is not well taken.

The FAC adequately alleges that the fraudulent representation was made in writing in August 2016 in Defendant’s “Application to Rent.” (FAC ¶ 25.) The FAC further alleges that Defendant knew these representations were false and intended Plaintiff to rely on these representations to induce Plaintiffs to rent the Premises to Defendant. (FAC ¶¶ 26, 28.) Thes allegations are sufficiently specific to satisfy the heightened pleading standards for fraud.

Finally, Defendant demurs to the FAC on the ground that fraud and rescission claims “improperly seek to effectively evict Plaintiff (by declaring she has no valid lease agreement) in direct violation of [Los Angeles Rent Stabilization Ordinance].” (Dem., 11:3-4.) Specifically, Defendant argues that the FAC does not allege any of the permitted grounds for eviction as set forth in Los Angeles Municipal Code section 151.09.

With respect to this argument, the FAC seeks damages and recission. There is no requested relief seeking eviction.

Additionally, Defendant argues that a fraud in the inducement claim cannot survive if the underlying contract is unenforceable as illegal. In support of this argument, Defendant cites Hydrotech Systems, Ltd v. Oasis Waterpark (1991), 52 Cal.3d. 988, for the proposition that a plaintiff cannot pursue a fraud in the inducement claim when the underlying contract itself was illegal.

The facts in Hydrotech Systems, Ltd v. Oasis Waterpark (1991), 52 Cal.3d. 988 are distinguishable as that case involved a unlicensed contractor and Business and Professions Code section 7031.

Section 7031 makes clear that it covers “any action” “in law or equity,” thereby “eliminat[ing]” both “contractual and quasi-contractual claims seeking ‘compensation’ for unlicensed work.” (Hydrotech, 52 Cal. 3d at 997.) Put another way, “section 7031 bars all actions, however they are characterized, which effectively seek ‘compensation’ for illegal unlicensed contract work.” (Id.) Thus, in Hydrotech, the California Supreme Court disallowed Hydrotech's tort claim, which alleged “it was induced to enter and perform an illegal contract by a false promise to pay; that it would not have performed had it known the promise was false when made; and that it therefore suffered damage.” (Id. at 998.) As the Court explained, “an unlicensed contractor may not circumvent the clear provisions and purposes of section 7031 simply by alleging that when the illegal contract was made, the other party had no intention of performing.” (Id.) “However artful the pleadings, if the primary fraud alleged is a false promise to pay for unlicensed construction work, and the primary relief sought is compensation for the work, section 7031 bars the action.” (Id. at 1002.)

Hydrotech Systems, Ltd v. Oasis Waterpark is not cited in any other context aside from the contractor’s licensing cases. Thus, this case is not applicable here and Defendant has not cited any other authority for her position.

Further, as a practical matter, Plaintiffs are not seeking to enforce an underlying (allegedly) illegal lease, but rather are seeking to recover damages suffered when Defendant fraudulently induced them to enter into the lease and, also, to rescind the lease.

“The court may, upon a motion made pursuant to Section 435, or at any time in its discretion, and upon terms it deems proper: (a) Strike out any irrelevant, false, or improper matter inserted in any pleading. (b) Strike out all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court.”¿(Code Civ. Proc., § 436.) “Immaterial” or “irrelevant” matters include allegations not essential to the claim, allegations neither pertinent to nor supported by an otherwise sufficient claim or a demand for judgment requesting relief not supported by the allegations of the complaint. (Code Civ. Proc., § 431.10, subds. (b)(1)-(3).)

Defendant moves to strike the request for attorneys’ fees, prejudgment interest and punitive damages from the FAC.[1]

First, Defendant argues that FAC fails to allege facts showing that Plaintiffs are entitled to attorney fees. Thus, she contends, the Court should strike the prayer for attorney’s fees.

Second, Defendant argues that Plaintiffs’ alleged damages are not certain and are not capable of being made certain by calculation, and therefore the Court should strike the request for prejudgment interest.

Finally, Defendant argues that Plaintiff has only alleged a “bare allegation of malice, oppression or fraud,” and thus the Court should strike the request for punitive damages.

Plaintiffs do not oppose the motion to strike the request for prejudgment interest and attorney fees. Thus, the motion is granted as to this request relief.

Punitive damages are recoverable where the defendant has been guilty of oppression, fraud, or malice, express or implied. (Civ. Code, § 3294.) “Something more than the mere commission of a tort is always required for punitive damages. There must be circumstances of aggravation our outrage, such as spite or malice, or a fraudulent or evil motive on the part of the defendant, or such a conscious and deliberate disregard of the interests of others that his conduct may be called willful or wanton.” (Taylor v. Superior Court (1979) 24 Cal.3d 890, 894.) Specific intent to injure is not necessary for a showing of malice—it is sufficient that the defendant’s conduct was so “wanton or so reckless as to evince malice or conscious disregard of others’ rights.” (McConnell v. Quinn (1925) 71 Cal. App. 671, 682.)

A request for punitive damages that is not supported with specific allegations of oppression, fraud, or malice is subject to a motion to strike. Conclusory allegations that defendants acted “willfully,” “maliciously,” or with “oppression, fraud, or malice” are not, without more, sufficient to give rise to a claim for punitive damages, but such language is permissible where the complaint contains sufficient factual support for the conclusions. (Perkins v. Superior Court (1981) 117 Cal.App.3d 1, 6-7.)

Here, Plaintiffs have sufficiently stated a claim for fraud. Accordingly, the motion to strike is denied as to punitive damages and granted as to attorney fees and prejudgment interest.

[1] In reply, Defendant, for the first time, argues that “Plaintiffs’ allegations with respect to damages are also deficient.” (Reply, 4:2.) The Court will not consider this newly raised argument.